GDP surge will extend next year, say analysts

By Eamon Quinn

GDP figures showing the economy is Europe’s fastest growing has the potential to keep up the pace in 2018, despite Brexit headwinds, analysts have predicted.

The CSO said under the conventional GDP measure that growth surged 4.2% in the summer quarter from the spring quarter, and soared 10.5% from a year earlier.

Ireland is again an outlier in the international growth league with an economy ostensibly growing at almost twice the pace of Romania, the second fastest-growing in Europe, and by over eight times the rate of the eurozone-wide average, which is posting one of its strongest recoveries ever.

And the figures are for once relatively free of the distortions of global tax arrangements of the multinationals which gave rise to the international jibe of ‘leprechaun economics’.

The underlying figures also showed strong numbers — a modified figure designed to strip out some of the purely accounting effects of the multinational activities — nonetheless posted a significant 2.9% expansion in the quarter and a posted growth rate of over 9% in the year.

Another underlying measure suggested the domestic economy was growing by an annual rate of 4% or 5%, senior CSO statisticians told reporters. Alan McQuaid, chief economist at Merrion, said that no matter which measure was applied, Ireland will likely remain at the top of the European growth league next year.

There was “a momentum for 2018” and every official forecasting number for growth this year underestimated the growth in the economy, while expansion next year was likely to be 5%.

Even though the headline growth rates of 10% or 11% exaggerate the true picture, the economy has grown since the last election and is set for strong growth in 2018, Mr McQuaid said.

Austin Hughes, chief economist at KBC Ireland, said an economic growth number “running around a 4% pace” this year was consistent with vibrant growth.

“The headline numbers are increasingly irrelevant. We are talking about a fairly robust economy. Consumption growth at 4%, we are talking about areas which are very hot but there are other areas where there are cool winds blowing,” he said.

“The hot areas are international technology and related international services. Those are growing really well but consumer spending at 3% and employment growing around the same level suggest that the domestic spending is still modest. It is healthy but it is not the runaway boom in those areas,” Mr Hughes said. Fergal O’Brien, director of policy and chief economist at business group Ibec, said: “The Irish consumer is in a really strong place. We have earnings growth of about 2.5% we have no inflation, consumers are in a sweet spot and now they are spending.”

The growth figures were however, not wholly free of the activities of multinationals, the CSO figures showed. A rise in so-called contract manufacturing in the summer quarter could be linked to Apple’s preparations for the launch of its new iPhones, analysts said.

“Contract manufacturing is back. One might speculate that it may be related to new Apple product or some such reason,” Mr Hughes at KBC said.

The CSO which is bound by confidentiality pledges does not disclose the identity of companies.


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