Fears of 'double-dip recession' as Irish economy contracts

The Irish economy began to contract again in the second quarter of the year, official figures revealed today.

The downturn came after businesses, both homegrown and multinational, had shown signs of picking in the first part of the year.

The report showed the value of goods and services, including foreign-owned companies, suffered a 1.2% decline in trade between April and June.

Homegrown businesses were also hit but not to the same extent, with their value down by 0.3%.

Consumer spending in volume terms was 1.7% lower in Q2 2010 compared with the same period of the previous year.

Capital investment, in constant prices, declined by 19.9% in Q2 2010 compared with Q2 2009.

Finance Minister Brian Lenihan said the figures showed homegrown business has stabilised and that weaknesses in the economy came from a surge in imports over the three months.

“This had a depressing impact on the overall GDP (gross domestic product) figure,” he said.

Mr Lenihan said the only way Ireland can turn the corner is to continue to drive exports.

“The figures for exports are strong and I am encouraged by this – the necessary competitiveness improvements are working. We must export our way out of our current difficulties, there is simply no other way,” he said.

Mr Lenihan added that the pace of decline in consumption and investment was easing and was broadly in line with projections.

Mr Lenihan said the economic data needed to be read in conjunction with other reports on unemployment and the public finances.

“For instance, labour market data published earlier this week, while remaining weak, point towards stabilisation, while the public finances to end-August are on target,” he said.

The Government is planning to issue revised forecasts on the economy and state finances in October ahead of Budget 2011 the following month.

Net exports (exports minus imports) in constant prices were €884m higher in Q2 2010 compared with Q2 2009, however.

Industrial output volume, including construction, increased by 1.7% in Q2 2010 compared with Q2 2009.

Within this, the output of the Construction sector fell by 28.8% over the same period.

Output of Distribution, Transport and Communications was down 0.7%.