GDP booms ‘but household spending not so much’

Official figures showing a rapidly expanding economy are tempered by recent data that suggest household spending is rising but not booming, economists say.

GDP booms ‘but household spending not so much’

The latest GDP figures are for the three months to the end of September and come well before the recent weeks of UK political turmoil which may have persuaded consumers and businesses alike to pull in their spending plans.

GDP rose in the third quarter by almost 1% from the second quarter and was 4.9% higher from a year earlier, the CSO figures show.

Those figures were again influenced by the activities of aircraft leasing firms which, though they employ few people, can account for billions of euro in imports and exports in any single period.

To a lesser extent, the GDP figures also showed the effects of the accounting of intellectual property rights of the multinational tech giants.

Stripping out such effects, the economy as experienced by the majority of households is growing by around 3% or 4%, officials suggest.

The quarterly figures do not include the new so-called GNI* measure which is designed to accurately reflect activity, free of the distortions of multinational accounting.

The GDP growth of 0.9% in the quarter for Ireland compares with growth of only 0.3% across the EU in the same period

Austin Hughes, chief economist at KBC Bank Ireland, said a Brexit dampening effect may show in the figures for consumer spending, investment, and construction later this year. Timely figures from the exchequer returns and retail sales appear to be showing a cautious consumer, he said, while “at the household level, spending is materially lower and there is a sense that people feel detached from the boom”.

It is also job-dependent, Mr Hughes said, saying well-paid IT workers may be tapping a boom, and most other households not so much.

“Our analysis of a range of alternative summary indicators of demand and output... points to underlying growth in the domestic economy being in a range of 4.5% to 6% y/y over the first three quarters of the year,” said Simon Barry, chief economist at Ulster Bank in the Republic.

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