Is the Irish economy growing, stalling or declining?

THE DOMESTIC economy and exports both grew solidly in the first quarter of the year, according to figures inadvertently published on the Central Statistics Office’s website yesterday.


A surge in imports pushed the two main measures of economic activity – gross domestic product and gross national product – into negative territory.


It is a quirk of GDP and GNP accounting that an increase in imports depresses both measures, even though an economy’s purchasing of goods and services from the rest of the world is a sign of strength, not weakness.


It is the surge in imports in the first three months of the year – by 4.9 per cent quarter on quarter – that accounts for the contraction in both GDP and GNP. Imports are highly volatile owing to the purchases of items, such as aircraft, which can distort the figures.

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There were some encouraging signs in the figures. Activity in the domestic economy grew for the first time in almost two years, although much of this was due to purchases of aircraft by leasing firms and airlines, and the biggest rise in government spending on goods and services since the crash.


Data also showed that Ireland's financial position with the rest of the world was stronger than had been thought. The balance of payments surplus for last year was increased more than ten fold to €1.8bn, while the 2010 figure more than doubled.

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For Q1 2012 they show that real GDP dropped 1.1% in the quarter so [broken link removed] was fully wrong while this poll was somewhat right.

To add to the confusion the release shows an economy that has contracted but exited recession at the same time.

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From the trade data, these aircraft imports will feed through to Investment in transport equipment in the Domestic Demand data. Investment did jump in Q1 2012 but it was because aircraft leasing companies based in Ireland bought some aircraft rather than any real improvement in domestic economic conditions. As [broken link removed] shows this distortion of domestic demand figures is going to continue.

Absent this propping up by aircraft leasing companies it is likely that Investment would have registered a similar change to Consumption, i.e. a drop. Yesterday’s release does not herald the return of the domestic economy.

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