Press release
Minister Donohoe notes strong recovery of domestic economy in second quarter
Published on
Last updated on
Published on
Last updated on
The CSO today (Friday) published the Quarterly National Accounts for the second quarter of this year. Commenting on the figures, Minister for Finance, Paschal Donohoe, said:
“While the figures show year-on-year GDP growth of 11 per cent in Q2, today’s release confirms that the domestic economy rebounded strongly as COVID-19 restrictions were finally removed.
“Modified domestic demand, the preferred measure of domestic economic activity, increased by 4.3 per cent in the second quarter and now stands at 9 per cent above the pre-pandemic level recorded in the fourth quarter of 2019.
“This is the first quarter in which consumers were uninhibited by pandemic related restrictions and it is encouraging to see the rebound in activity, with consumer spending growing 1.8 per cent over the quarter. Indeed consumer spending essentially returned to pre-pandemic levels in the second quarter, a very notable outcome.
“The robust consumer spending growth is also reflective of the buoyant labour market conditions, with a record level of well over 2½ million people at work. These trends are also in-line with strong growth in VAT and income taxes recorded so far this year. Earlier this week, data showed that the unemployment rate was just 4.3 per cent in August – so we are seeing very low unemployment and strong employment even after the COVID-19 supports were removed; this is very encouraging.
“I am also heartened to see that private sector investment in the domestic economy remains strong, despite mounting geopolitical uncertainty. In particular, I note the strong growth in machinery and equipment investment, up 30 per cent over the quarter, a vote of confidence in the Irish economy by the private sector. Housing investment remains strong though, of course, much remains to be done.
“Despite the strong rebound in activity evident in today’s figures, I am conscious that a number of indicators suggest that momentum has eased in the third quarter while the outlook over the coming quarters has weakened considerably. Global inflationary pressures, resulting from the surge in energy prices from Putin’s war, are eroding real incomes and undermining growth prospects both domestically and in our main trading partners.
“The government is committed to tackling the cost of living challenges head on and the forthcoming Budget will set out a range of supports to help alleviate the inflationary pressures on society. In doing so we must strike a balance between protecting the most vulnerable households and firms from a once-in-a-generation energy price shock, while at the same time ensuring that policy doesn’t worsen the inflationary cycle.”
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 level of consumption was €27.78 billion (seasonally adjusted) in the fourth quarter of 2019. It stood at €27.7 billion in the second quarter this year, a difference of 0.3 per cent.