Pace of economic growth decelerates in Q3: CSO

Ireland remains on course to be the fastest growing EU economy in 2014 despite GDP increasing by a marginal 0.1% over the third quarter of the year.

The latest national accounts from the Central Statistics Office show that GDP grew by 0.1% over the July to September period, compared with the previous quarter, although it grew by 3.6% compared with the same period in 2013. The pace of economic growth has decelerated from the breakneck speed over the first half of the year. GDP growth over the three months from April to June was 1.1% compared with the first quarter, but up an impressive 7.3% compared with the same period in 2013.

The Government is on track to meet all its targets this year. It estimates that the economy will grow by 4.7% over the 12-month period.

Personal consumption was flat over the third quarter. Investec chief economist, Philip O’Sullivan, said the flat outturn for consumption was surprising given a raft of surveys released over the past few months which point to a bounce in activity. For example, the KBC-ESRI Consumer Confidence index hit a seven-year high of 92.8 in September, while the labour market performed steadily during the third quarter, with unemployment falling to 11.1%, noted Mr O’Sullivan.

“We understand that the flat outturn has been heavily influenced by services (in particular, tourism). However, we would not be surprised to see this figure revised higher given the general signs around the Irish consumer during the quarter,” he added.

Investment and exports performed solidly over the third quarter. Balance of payments data show that the current account surplus widened to €3.8bn in the third quarter compared with €2.7bn a year earlier.

The consensus forecast at the start of the year was that the Irish economy would grow by 2%. On that basis, the IMF and the EU Commission urged the Government to implement €2bn in tax increases and spending cuts in October’s budget in order to reduce the fiscal deficit below 3% by the end of next year. Instead, the Government introduced a broadly neutral budget, including a number of cuts to income tax. With an election looming, the prospects of the coalition partners hinge on a robust recovery filtering through to all parts of the economy.

“Although broadly in line with our expectations, today’s data may disappoint some commentators expecting GDP growth in excess of 6% in 2014 — placing too much weight on the second-quarter figures,” said Davy Stockbroker economist, Conall MacCoille.“The exceptional 7.3% annual growth in the second quarter was always likely to have reflected volatility in the data. Similarly, the flat growth in the third quarter is not too concerning.”