Minister McGrath notes publication of national accounts for 2023, welcomes reduction in inflation

Modified Domestic Demand – proxy for the domestic economy – grew by 0.5 per cent in 2023.
Modified Domestic Demand was down 0.4 per cent in the fourth quarter relative to the previous quarter.
Consumer spending grew by 3.1 per cent last year but was unchanged in the fourth quarter.
GDP was down 3.2 per cent last year and fell 3.4 per cent in the fourth quarter.

The Central Statistics Office today (1st March) published the Quarterly National Accounts for the fourth quarter of 2023 and an updated estimate for 2023 as a whole.

Commenting on the figures, Minister for Finance, Michael McGrath T.D., said:

“Modified Domestic Demand – my preferred metric of Ireland’s economic performance – grew by a modest 0.5 per cent last year, and contracted by 0.4 per cent in the final quarter of last year, with the contraction driven entirely by a fall in private sector investment spending.

“Importantly, investment in housing remained robust, up at an annual rate of 12 per cent in the fourth quarter. I expect housing supply to continue expanding in the year ahead, with over 34,000 new units commenced in the twelve months to January 2024. We should see these units coming on-stream as the year progresses.

“Consumer spending grew at a solid pace of 3.1 per cent last year. This was underpinned by strong employment growth – figures published last week show a record 2.71 million people in employment in the fourth quarter of last year. The strength of the labour market – with 90,000 jobs added in the last twelve months – is a good measure of the underlying health of the domestic economy.

“That said, today’s data show that consumer spending was flat at tail-end of last year – with the tightening of monetary policy weighing on spending. In this context, I would highlight the easing of inflation – to 2.2 per cent in February, its lowest rate since July 2021 – which will help support the purchasing power of households and underpin spending over this year. Ireland’s estimated inflation rate is now 0.4% the euro area rate.

“Income tax reductions introduced in Budget 2024 will also underpin real income growth. I expect that the vast majority of people will experience an improvement in living standards this year, as income growth combined with personal tax reductions and other social supports, will comfortably exceed the rate of inflation. I also anticipate that we will see further reductions in energy prices for households and businesses, driven by improvements in the wholesale energy markets.

“Today’s figures also show that GDP fell by 3.4 per cent in the fourth quarter, continuing a trend we have seen in recent quarters. As is widely acknowledged, GDP is not a useful measure in assessing the living standards of domestic residents, given the outsized role the multinational sector plays in our economy. The decline reflects a re-normalisation of activity in some sectors – mainly pharmaceutical – following a Covid-related boost in demand in 2021 and 2022. Indeed the trend in GDP contrasts sharply with employment which was up by 3.5 per cent in 2023.

“As is the norm, my Department is now in the process of updating its economic and fiscal forecasts, and these will be published in the Stability Programme Update early next month.”

Ends

Note to editors:

Modified (final) domestic demand, a proxy for the domestic economy, is the sum of personal and government consumption and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.

The rate of HICP inflation in February was 2.2 per cent, down 6 percentage points since the same month last year.