The available labour data shows that Irish employment continued to grow very strongly in the first quarter of the year (by an annual 3.5%) and the decline in the unemployment rate since implies that pattern is still intact. One would expect GDP growth to be stronger, given normal productivity growth, and although the Irish quarterly GDP figures are extremely volatile, the picture from the National Accounts is broadly consistent with the employment data; annual GDP growth in q2 was 5.8%, following a 5.2% rise in q1, to give an average for the first half of the year of 5.5%.The figure for the full year is likely to be lower, given the surge in reported GDP in the latter part of 2016, and we expect around 4%.
On a quarterly basis GDP expanded by 1.4% following a revised 3.5% contraction in q1. The latter reflected a plunge in investment spending, mainly related to mulinational R&D , and that reversed in q2, duly accounting for most of the rise in GDP. Consumer spending actually fell, by 1.1%, and on the published national accounts consumer spending is now only 34% of GDP and only marginally ahead of capital spending- in most developed economies the former is well above 50%.
The CSO now publishes a separate figure , Modified Domestic Demand, to give a better picture of underlying spending and output in the Irish economy, as it strips out multinational flows into R&D and aircraft leasing . On that metric real demand grew by an annual 4.2% in q2 following a 5.8% rise in q1, so the average increase over H1 is still a very healthy 5.2%, indicating that the underlying economic performance remains strong. One puzzle is limp consumer spending, averaging growth of just 1.8%, which is modest given the strength of employment growth alongside 2% growth in pay. and zero inflation. Domestic investment spending is expanding at a robust pace, in contrast, with annual growth averaging 15% over the first half of the year, albeit hiding a mixed performance, with buoyant construction offsetting a fall in domestic spending on machinery and equipment.
Overall, it would seem that the Irish economy continues to expand at a robust pace, if one discounts the extraordinary short-term volatility and adjusts for the distortions caused by the sheer scale of the multinational flows.