Minister Donohoe notes strong recovery in domestic economic activity in second quarter with MDD surpassing its pre-pandemic level

GDP grew by 6.3 per cent quarter-on-quarter (22 per cent year-on-year) in the second quarter of 2021.
Modified domestic Demand (MDD) grew by 8.4 per cent quarter-on-quarter (15 per cent year-on-year).
Caution should be exercised when interpreting annual changes, as the comparison is with an exceptionally low base during the first lockdown.
MDD surpassed the level immediately preceding the pandemic (2019-Q4) for the first time since the start of the crisis.
Consumer spending was up by 12½ per cent and construction was up 23 per cent quarter-on-quarter

The CSO today (2nd September) published the Quarterly National Accounts for the second quarter of 2021. Commenting on the figures, Minister for Finance, Paschal Donohoe T,D, said:

“I note the strong GDP growth of 6.3 per cent in the second quarter of 2021. This was supported by broad-based growth in both domestic demand as well as in net exports. Not surprisingly, given the easing of Covid-19 restrictions during the second quarter, the domestic economy recovered strongly.

“I place a much greater emphasis on MDD than GDP as a measure of the underlying performance of the economy. MDD grew by almost 8½ per cent compared to the previous quarter. This was the second highest quarterly growth rate on record, second only to the third quarter of last year, when the economy bounced-back after the first lockdown. As a result, MDD is now 1 per cent above its pre-pandemic level, the first time that the level from the fourth quarter of 2019 has been surpassed.

“All sectors in the domestic economy recorded strong growth, with consumer spending and construction particularly strong. Consumer spending increased by 12½ per cent, though it still remains below its pre-pandemic level. Looking at housing in particular, in the four quarters to end of the second quarter this year, there were roughly 21,000 housing completions and 27,000 starts. This will provide much needed momentum into the second half of this year, with housing supply set to be further boosted by the Government’s new Housing for All strategy.

“The recovery in MDD is expected to continue in the third quarter with more sectors re-opening, although at a somewhat softer pace. Data from payment card transactions showed positive but easing rates of growth in spending in July and August. Similarly in the labour market, the numbers of persons on the pandemic payment has fallen by 70 per cent from the third wave peak of 486,000 in early February, with large declines seen throughout June and July, though the pace of decline moderated in August.

“On the back of a successful vaccination programme, the Government published its latest re-opening plan this week, with the last remaining sectors set to re-open shortly. While I am conscious that there are many risks on the horizon, not least in terms of the unpredictable epidemiology of the virus, today’s positive economic data alongside the robust tax data for August which we are publishing later today, mean that we can approach the forthcoming Budget with a far greater degree of confidence than at any time since the pandemic began.”

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 level of seasonally adjusted MDD stood at €46.44 billion in the second quarter this year. This compares to the pre-pandemic level of €46.1 billion recorded in the fourth quarter of 2019.

The number on the PUP is currently around 144,000 (30 August); during the third wave of the virus, the number peaked at 486,000 on 8 February.