Ireland: Economic growth rebounds in Q1 on new GDP measurement
July 3, 2014
In Q1, the economy expanded 2.7% over the previous quarter in seasonally-adjusted terms. The increase contrasted the 0.1% decrease observed in Q4 and more than doubled the 1.2% rise in GDP that the market had expected. The expansion marks the highest quarterly reading since Q4 2012 and was greatly influenced by the Central Statistical Office’s adoption of new EU rules on calculating economic output, which include spending on research and development along with illegal activity. In fact, nearly 5.0% was added to Ireland’s GDP because of the new standards.
The new measurement rules that boosted GDP in Q1 made up for otherwise soft growth in domestic demand. In Q1, domestic demand rebounded from a 1.0% contraction in Q4 to a modest 0.1% increase. Private consumption fell 0.1%, which matched the previous quarter’s result. Government consumption declined 2.1% (Q4: +1.4% quarter-on-quarter). Fixed investment tumbled to an 8.1% contraction after having expanded 5.7% in Q4.
On the external side of the economy, exports slowed from a 2.0% expansion in Q4 to a 1.8% increase in Q1. However, imports dropped even more, recording a modest 0.8% expansion (Q4: +1.7% qoq). As a result, the external sector’s net contribution to GDP growth increased from 0.7 percentage points in Q4 to 1.2 percentage points in Q1.
On an annual basis, the economy recovered from the 1.2% contraction in Q4 and surged to a 4.1% expansion in Q1.
Author: Carl Kelly, Economist