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Economy still growing, but domestic demand down

Official figures for the third quarter of this year show that, while the Irish economy grew overall, there was a decline in demand in the domestic economy.

The Central Statistics Office (CSO) said that gross domestic product (GDP) rose by 2.3% in the three months to the end of September.

Gross national product (GNP), which excludes profits from multi-nationals, fell by 2.2% during the quarter.

Modified domestic demand – a broad measure of underlying domestic activity that covers personal, government, and investment spending – fell by 1.1% during the quarter. This was the first drop in this indicator since the first quarter of last year.

Personal spending on goods and services rose, however, by 0.3%. The CSO points out that such spending was still 1.3% below the pre-pandemic peak of €28.2 billion recorded in the second quarter of 2019.

Surge in imports

The figures show that trade movements had a significant effect on the figures, as a 27% surge in imports outstripped a 4.8% rise in exports.

A breakdown showed that sectors of the economy dominated by multi-national companies grew by 2.5% in the three-month period – a slower rate of growth than in the first two quarters of this year.

While the multi-national industrial sector expanded by 9%, the impact of a global slowdown in the technology sector was seen in the information-and-communication category, which recorded a decline of 7.4%.

In the domestic economy, the construction sector grew by 0.9% during the quarter, but the category covering distribution, transport, hotels, and restaurants recorded a 0.3% drop.

The sector that includes professional, administrative and support services fell by 2.5%, while there was a 5.2% decline in finance and insurance.

Results for the first nine months of 2022 show an 11.7% increase in GDP compared with the same period last year. Personal spending was up by 7.2%, while modified domestic demand grew by 10.1%.

Balance of payments

Separate figures showed that the current account of the balance of payments recorded a deficit of €4.5 billion in flows with the rest of the world – a turnaround of more than €27 billion compared with the surplus of €22.7 billion in the third quarter of 2021.

This was the first quarterly deficit since the first quarter of 2020.

The merchandise balance improved by €8.7 billion, but the services balance disimproved by €23.6 billion, driven by imports of intellectual-property products.

Net outflows of multi-national profits were €33.8 billion in the quarter – an increase of €11.3 billion compared with the same period last year.

In a note accompanying the statistics, the CSO said that the response rate for some of its surveys was lower than normal in the third quarter of this year, “due to the temporary closures relating to COVID-19, and the difficulties faced by all participants in the economy”.

It also signalled that the figures for economic growth could be revised in future, as it assesses the impact of COVID-19 restrictions on its statistical models.