Minister Donohoe notes the modest easing in the domestic economy during the third quarter, in line with expectations

Modified Domestic Demand fell by -1 per cent in the third quarter of this year
Modified Domestic Demand now stands 9 per cent above the pre-pandemic level in the fourth quarter of 2019
consumer spending grew by just 0.3 per cent in the third quarter – and is now broadly in line with pre-pandemic levels of expenditure
GDP grew by 2.3 per cent in the third quarter due to strong MNC-related exports

The CSO today (2 December) published the Quarterly National Accounts for the third quarter of 2022. Commenting on the figures, Minister for Finance Paschal Donohoe said:

“Whilst GDP continues to grow strongly, this does not reflect events on the ground in the domestic economy, given the outsized role the multinational sector plays in our economy. Modified domestic demand, our preferred measure of domestic economic activity, decreased by -1 per cent in the third quarter.

“However, this modest decline in activity largely reflects a return to trend for investment following an exceptionally high level in the second quarter, which was largely driven by multinational investments in plant and machinery.

“Consumer spending slowed over the third quarter, broadly in line with expectations, though it did grow modestly, an encouraging outcome considering the headwinds households continue to face. This resilience reflects the strength of the labour market, with well over 2½ million people in employment, a record level, and an unemployment rate of just 4.4 per cent in November.

“Today’s data, as well as the employment data published last week, are very much in line with my department’s projections, as published at the time of the Budget, last September.

“Growth prospects across Ireland’s main trading partners have clearly weakened over recent months with potential knock on implications for Irish exports. And we saw this morning that one of Ireland’s biggest employers is temporarily scaling-back employment, albeit on a voluntary basis.

“However, I am encouraged by the continued strength of our exports as well as recent investment announcements in the MNE sector. On the other hand, with inflation eroding real incomes of households and undermining the profitability of SMEs, I would expect the pace of growth in the domestic economy to remain soft throughout the final months of this year and into the first half of next year. That said, my department will publish the November tax data later today, showing strong receipts in corporation tax, income tax and VAT.

“The continued resilience in our domestic economy reflects the range of supports the government has put in place to protect both businesses and households from the rising cost of living pressures. Budget 2023 included a total package of €11 billion, of which over €4 billion has been set aside for once-off cost of living supports, mainly in the final quarter of this year. Our approach balances the need to provide fiscal supports to households and firms while, at the same time, avoiding adding to inflationary pressures in the economy.”

Notes

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.