Economy is still ‘growing strongly’ amid distorted data, say experts

Boosted by domestic spending, the economy is continuing to grow strongly, CSO figures published yesterday suggest, despite the accounting procedures by multinationals distorting an in-depth understanding of what is really going in the Irish economy.

The CSO figures showing the economy climbed 5.2% in 2016, the fastest in the EU, came amid huge statistical distortions caused by one or more multinational shifting large amounts of intellectual property rights into Ireland. Under confidentiality clauses, the statistics office suppressed some data.

The chief economist at Davy Stockbrokers, Conall Mac Coille, said the headline GDP growth figure nonetheless reflected the true level of growth and was consistent with other indicators showing employment growing strongly.

He expressed frustration that “under the bonnet” intellectual property transfers were distorting the picture of Irish economic activity at a time when the country is facing into Brexit.

The scale of the intellectual property transfers showed up again in the annual figures, as capital formation surged 45.5%.

The transfer of intellectual property in 2015 forced the CSO to revise figures last year that supposedly showed the economy ballooned by 26.3%. The CSO is working on developing a new measurement for economic growth, called adjusted gross national income, or GNI*, to help the Government get a clearer picture of economic activity.

In an analysis called Irish GDP-Fake News!, Dermot O’Leary, the chief economist at Goodbody Stockbrokers, said the urgency of implementing the new growth measure was reflected in yesterday’s “rather meaningless set of data”.

CSO officials cited underlying indicators of the economy, including tax revenues, jobs growth and construction activity as further evidence that the economy was growing.

The 2016 preliminary figures showed personal consumption of goods and services — a key sign of the economic health of the domestic economy — rose 3% in the year.

By sector, the “industry” slice of the economy, which is dominated by the multinationals, grew in the year. There was significant growth in areas such as transport which suggest the domestic–facing parts of the economy were also thriving. Building and construction climbed 11.4% in the year.

The CSO figures show that the transfers of intellectual property into Ireland are becoming more frequent.

Aland McQuaid, the chief economist at Merrion Capital, said that through no fault of the CSO “that the national accounts data remain unsatisfactory in many ways”.


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