GDP rebound of 3.3% in second quarter may mean economy is out of recession
The Irish economy as measured by Gross Domestic Product (GDP) returned to growth in the second quarter of the year, new preliminary figures from the Central Statistics Office (CSO) show.
GDP grew by an estimated 3.3% between April and June.
That compares to a contraction of 2.8% in the first three months driven by a 13% drop in industrial production, due to volatility in activity in the pharma sector.
It means that the economy may have emerged from the technical recession recorded because of a very slight contraction in the final quarter of 2022 and the bigger one during the first quarter of 2023.
However, the GDP flash estimate is a relatively new data set and the CSO warns that care must be taken when interpreting it because it may use new methods that are under development or incomplete data sources.
The data is subject to later revisions in the Quarterly National Accounts, with the results of those for the second quarter due in September.
Previous GDP flash estimates have been heavily revised in subsequent releases.
The CSO said the rebound in GDP in the second quarter was driven mainly by increases in the multinational dominated sectors.
“In today’s release, Gross Domestic Product (GDP) is estimated to have risen by 3.3% in Q2 2023 in volume terms when compared with Q1 2023, driven by increases in the multinational dominated sectors (the Industry and Information & Communication sectors) in Q2 2023,” said Jennifer Grimes, Statistician in the National Accounts Data Collection and Quality Division.
“GDP is estimated to have increased by 2.7% when compared with the same quarter of 2022.”
The CSO does not provide a further breakdown of the drivers of the second quarter growth.
However, Davy chief economist Conall MacCoille points to other indicators of strength over the period.
“Pay-rolled employees rose 1.3% in the three months to May to 2.44 million,” the economist said.
“Total and core retail sales volumes were also up 4.6% and 1.4% over the same period,” he said.
“The composite PMI averaged 52.3 in Q2 2023, with the services (57.4) sector offsetting weak readings in manufacturing (47.8). Finally, €7.8 billion of tax revenues collected in Q2 were up 8% on the year,” he added.
Commenting on today’s CSO figures, Finance Minister Michael McGrath said that today’s GDP figures are initial estimates and more detailed information will be published in early-September.
He said that as he has stressed in the past, Modified Domestic Demand is a much better indicator of what is going on in the domestic economy and these data will be published just over a month from now.
“My Department will then begin the process of producing its autumn forecasts that will underpin Budget 2024,” the Minister said.
“That said, high frequency data suggest that the domestic economy performed reasonably well in the second quarter – consumer confidence strengthened, unemployment reached a record-low of 3.8% in June and construction activity picked up,” he added.