Data just released by the Central Statistics Office (CSO) show that Irish GDP increased 0.9% in 2012, ahead of market expectations (0.6%) and in line with government forecasts. For reference, we were forecasting growth of 0.4%. GNP jumped 3.4% during the year, due to an improvement in net factor income flows.
The outperformance relative to consensus was driven by a lower than expected decline in domestic demand (-1.5% vs. -1.9% consensus). Of the components of domestic demand, both consumption (-0.9%) and investment (+1.2%) were ahead of expectations, while government spending (-3.7%) remained a drag.
Net exports were broadly in line for the year, with exports growing 2.9% and imports increasing 0.3%. Within the export data, we note that weakness in goods exports (-2.8%) was ably compensated for by a surge in services exports (+8.9%). Indeed, separate Balance of Payments data also released by the CSO this morning show that services trade recorded a €3.0bn surplus last year (2011: deficit of €1.8bn), with computer and business services areas of particular strength in that regard. In total, Ireland’s current account surplus came in at €8.1bn (4.9% of GDP), a strong performance.
In terms of trends in the last quarter of 2012, domestic demand increased 0.7%, while import growth (0.8%) outstripped export growth (0.5%), leaving seasonally adjusted GDP flat on the quarter.
Overall, this morning’s data look like a good quality beat for the full year. In particular, trends in domestic demand look to have improved in the second half of 2012, a welcome development given the difficult environment for external trade (primarily due to wider euro area softness and pharma-related issues). As ever, we would caution against reading too much into the specific numbers as Irish GDP data are inherently volatile, with large revisions not uncommon. We prefer, instead, to focus on the underlying trend, which remains intact and should pick up pace this year as the domestic economy proves less of a drag on headline growth.