The initial 2% estimate for Irish GDP growth in the third quarter was revised up to 3.5%, with the second quarter figure also revised higher. As a result the annual change in GDP was 2.9%, the first positive figure since the final quarter of 2022. It is also now likely that the average growth rate in 2024 will be marginally positive following a 5.5% contraction last year.
The quarterly growth figure was driven by a big rebound in capital formation, in turn due to a recovery in spending on R&D by the multinational sector, recorded as Intangibles. Construction spending also rose, by 4.5%, which supported modified capital formation growth of 5.2%. Modified domestic demand also rose in the quarter, by 1.3%, and looks on course for average growth in 2024 of 3%.
Service exports had been growing very strongly this year , driven by computer and business services, but the latter fell sharply in q3 and overall service exports fell 14% in the quarter, perhaps highlighting the company specific driver of quarterly volatility in external trade and capita formation. Exports in total fell 7% in the quarter, albeit still showing annual growth in excess of 10%.
The other negative contribution to growth in q3 was personal consumption. The fall was modest, at -0.2%, but that followed weak figures in the first half of the year (+0.3% in both quarters). Upward revisions often occur and as sit stands the weakness is surprising give the fall in inflation this year and the strong rise in employment and household incomes.