Data released this morning by the Central Statistics Office (CSO) show that the economy grew by 0.2% q/q in GDP terms in Q3 2012. The CSO has revised its GDP reading for Q2 to +0.4% q/q from the previous 0.0%. GNP contracted by 0.4% q/q after growing by 4.7% q/q in Q2. On an annual basis both GDP (+0.8%) and GNP (+3.7%) were in positive territory in Q3.
While the headline numbers are distorted by significant revisions to the initial Q2 reading, high frequency data releases had pointed to an improvement across the economy during the quarter and this is reflected in today’s release. The CSO’s figures show most GDP components expanded in Q3, with consumption +0.5% q/q, investment +8.5% q/q, exports +0.3% q/q and imports +2.1% q/q. Only government (-0.3%) was in negative territory during the quarter. This is a significant improvement on Q2, where all components declined relative to the Q1 outturn.
As noted above, improved readings from indicators ranging from retail sales and unemployment through to the PMI indices all pointed to a pick-up in the Irish economy in Q3. Hence, it is no surprise to see that domestic demand advanced by 2.0% q/q after declining by 3.2% during Q2. In terms of the externally-focused sector of the economy, balance of payments data also released by the CSO today show that Ireland’s current account surplus fell by €0.2bn q/q in Q3-2012 to €3.0bn. The country’s services trade surplus increased €0.2bn to €1.5bn during the quarter but this was insufficient to compensate for an unexpected fall of €0.5bn in the reported merchandise surplus. All in all, the underlying trends remain very positive for Ireland on this front. The current account balance returned to surplus in 2010 (€1.8bn, or 1.1% of GDP) and now stands at €7.0bn (4.3% of GDP) on a rolling four quarter basis. Furthermore, it should be noted that the €3.2bn surplus recorded in Q2-2012 was the highest on record.
In all, given how notoriously volatile and revision-prone quarterly Irish GDP data are, in terms of drawing a conclusion from the above we prefer to focus on the underlying trends as opposed to the specific numbers themselves. What these tell us is that the gradual recovery in the Irish economy is continuing. On an annual basis, GDP has expanded in 5 of the last 6 quarters, while on the same basis GNP has grown in each of the last 3 quarters. We expect to see this momentum continue into the New Year.