Consumer spending helps rise in GDP

IRELAND’S gross domestic product (GDP) showed a year-on-year increase of 4.8% for the third quarter of this year boosted by a growth in consumer spending.

The latest quarterly national accounts issued by the Central Statistics Office (CSO) show consumer spending is up 6.5% for the quarter on a year-on-year basis and was a significant driver, as was consumer investment, which showed an annual rise of 7.7%.

Retail sales volumes increased on a yearly basis by 5%, implying that consumer spending on services which comprises around half of the total figure were up by about 8%.

Investment in new housing and extensions to existing properties rose by 5% year-on-year over the quarter, following a generally flat first half to the year. Gross National Product (GNP), meanwhile, showed a 7% year-on-year rise.

GDP growtheached its fastest pace here for six quarterly periods. The pace of expansion in Ireland compares favourably to a 1.5% average in the eurozone.

Ireland's GDP has grown at four times the rate of the eurozone average over the past 10 years.

Rising employment has helped boost spending on cars, property and clothes with the boom in construction jobs this year resulting in record levels of housebuilding in order to meet the ongoing property demand.

Analyst with Davy Stockbrokers, Robbie Kelleher, suggests that consumer confidence levels are likely to continue.

"Initial indications from retail sales and consumer confidence suggest that the momentum has continued into the fourth quarter.

"The expansionary Budget, healthy employment and wage growth and SSIA drawdown hint that we will see vibrant consumer spending growing in 2006 probably at least as fast as the pace of expansion in the third quarter of this year," he said.

"It happened to be the best quarter for exports in a year but these still only increased by 3.5% year-on-year. Service exports, up by about 5% in volume based on our estimates, were stronger than goods exports. Big gains for Irish residents on foreign portfolio investments also boosted third quarter GNP growth."

Chief economist with Goodbody Stockbrokers, Dermot O'Leary, added: "The most encouraging aspect has been the performance of consumption. The Irish consumer has been quite cautious over the last two years and has revived this year. It's the biggest component of growth."

The volume of industry output for the third quarter rose 3% compared with the same period last year. Output of distribution, transport and communications, meanwhile, was up 5.6%.

Output of other services showed a 6.1% rise. Net exports for the third quarter were €172 million lower than for the same period last year.