Economy continues its strong growth

THE latest set of economic statistics confirm an Irish economy continuing to deliver strong growth in 2004.

It expanded by almost 6% in the year to the end of September.

The actual annual growth rate in the third quarter, measured in terms of gross domestic product, was 5.8%, figures released by the Central Statistics Office show.

When allowance is made for an increase in the level of profits repatriated abroad by multinational companies, growth was 4.2% which is the Gross National Product measure of economic activity.

Some economists argue this is the truer figure from an Irish perspective, given the heavy reliance on multinational investment, which transfers much of its profits back to their headquarters in the US and elsewhere.

Other reports have already shown the rate of economic activity was remarkably stable this year.

In the first nine months of this year about €25.5 billion worth of output was added every three months.

CSO figures also show that, after allowing for inflation, consumer spending was up 2.8% and industrial output was up 4.9% compared with the third quarter of last year.

Capital investment rose 3.6%, but that was well down on the 15.4% rate in the second quarter.

Output in house building in the third quarter was unchanged from the same period last year, indicating that house building may have reached its full capacity, the CSO said.

Economists are expressing concern that a reduction in output from house builders next year could depress economic growth figures for 2005.

Meanwhile the latest US statistics show the economy grew at a 4% annual pace in the third quarter of 2004.

That’s faster than previously thought and confirms the view that the US is on a recovery trajectory, despite concerns over oil prices and the serious underlying drag on US national finances due to the Iraq war.

The Commerce Department previously reported gross domestic product growth of 3.9% in the quarter.

The slight improvement was because imports were not as high as first estimated, though corporate profits weakened.

Wall Street economists had forecast that third quarter growth would be unrevised at 3.9%.

In the US the further good news was that inflation was remaining pretty tame although there was evidence of some pick up in prices.

That is highlighted in a measure favoured by Federal Reserve Chairman Alan Greenspan.

The figure is reached by deducting food and energy costs from total personal consumption.

It showed an annual gain of a 0.9% annual rate instead of 0.7% estimated a month ago.

Consumer spending, which accounts for a full two-thirds of US economic activity, powered ahead at 5.1% in the third quarter which underlines the view that the US economy is back delivering trend growth.