The Irish economy grew by 0.9% in the first quarter of the year according to the CSO’s initial estimate , which followed five consecutive quarterly contractions. That decline reflected large falls in multinational manufactured exports and the recovery was also sparked by the multinational sector, albeit from service exports and such was the scale of the increase that it now looks more likely that the annual GDP figure for 2024 may show modest growth , having looked more like zero or even a further contraction such was the scale of the negative carryover from last year.
Exports in total grew by a 7.3% in volume terms in the quarter, driven by an 11% rise in services which dwarfed a 2% increase in goods. This still left the latter 17% down on the previous year, and although merchandise exports made in Ireland (dominated by organic chemicals and Pharma) were €2bn higher than a year earlier, goods processed abroad are still falling, down €14bn on the year. Service exports, in contrast, rose by an annual €20bn, to €103bn in the quarter, including an €11bn rise in computer services, largely software, and a €5bn rise in business services. It may well be that the AI impact on the sales of the likes of Meta, Google and Microsoft could have a more significant and persistent impact on Irish exports into the future.
Household disposable income in Ireland grew by an annual 10% in q1, supported by further employment growth, but the savings ratio is rising again (up to 14.7% in q1) and so consumer spending growth has been modest, at 0.6% in real terms in q1 following no growth in the previous quarter and is only 1.7% higher than a year ago. Construction spending fell sharply in the quarter, dampened by weaker housebuilding and a sharper decline in non-residential construction. Spending by Irish firms on machinery and equipment did rebound , however, so modified capital formation grew by 7% and as a result modified domestic demand also rose, by 1.4%. Overall capital formation fell though, , by a huge 40%, reflecting big declines in multinational spending on machinery and equipment and intangible assets, which also impacted imports, which fell by 6%.
As noted, the economy entered the year with a huge negative carryover effect from 2023 (GDP in q4 was down 8.7%) and the growth rebound in q1 this year still left the annual change at -6.5%. However the first quarter export performance does make it more likely that annual GDP in 2024 may well be modestly positive, at around 1.5%. The quarterly profile also means that 2024 could end the year with a strong annual carryover into 2025.