The Irish economy grew by 13.6% in real terms last year and the annual growth rate remains remarkably strong, at 11.1% in the second quarter from 10.8% in q1. Growth may soften over the second half of the year, notably from weaker consumer spending, but absent a fall in exports a 10% figure looks plausible.
On a quarterly basis GDP grew by 1.8% in q2, with the expansion more balanced than often seen in the Irish data, where exports dominate. Consumer spending had fallen for two consecutive quarters but rebounded in q2, rising by 1.8%. This may seem at odds with the very weak retail sales seen of late but the latter also rose in q2, albeit solely due to a surge in spending in April, with sharp declines to July. The implication is that consumer spending may fall again in q3.
Government spending also rose in q2 , by 2.7% and there was also a strong rebound in capital formation, rising by 17.9%. Building and construction spending rose by 4.8% in the quarter,while investment in machinery and equipment increased by 26% , with spending on Intangibles also positive, at 22%.
Strong domestic demand, particularly from investment, would normally be reflected in imports, and growth there was 5.5%, which outstripped export growth of 3.3%. GNP, which adjusts for net profit and interest outflows , also expanded, by 2.1%.
The annual GDP figures also reflect the scale of price inflation seen this year, notably in external trade, construction and consumer spending. Consequently GDP in nominal terms rose by an annual 17.7% in q2 following a 15.7% rise in q1. Absent a contraction in the second half of the year the implication is that the combination of very strong real growth plus the impact of inflation could result in Irish nominal GDP rising by 17% , so reaching €500bn for the full year.