Irish domestic economy contracts slightly by 0.5%

Largest contraction in the April to June period was seen in the arts and entertainment sector, down 10.1%

Finance Minister Jack Chambers said the fall in GDP 'reflects the volatile nature of activity in the multinational sector'.

The domestic economy contracted slightly by 0.5% in the period April to June as significant contractions were recorded in the finance and insurance sector, as well as in arts and entertainment, new data from the Central Statistics Office (CSO) shows.

Gross Domestic Product fell by 1.0% in Quarter 2 2024, while Modified Domestic Demand decreased by 0.5%https://t.co/tFaEO0gPcw#CSOIreland #Ireland #NationalAccounts #BalanceofPayments #Economy #Economics #Macroeconomics #EconomicIndicators #CapitalStocks #FixedAssets pic.twitter.com/eK7y8chDJP

— Central Statistics Office Ireland (@CSOIreland) September 5, 2024

According to the data, modified domestic demand — a measure of underlying domestic economic activity that strips out the activity of multinationals — fell by 0.5% over the three months. 

However, in the year to the end of June, it is up by 1.5%.

In the domestic economy, the largest contraction was seen in the arts and entertainment sector, down 10.1%, followed by the finance and insurance sector, which was down 9.8% during the quarter.

The professional, administrative, and support sector fell by 2.9%, while the agriculture, forestry, and fishing sector decreased by 2.3%. Construction contracted by 1% over the same period.

There were modest increases recorded in the real estate sector and public administration, education, and health of 0.9% and 0.8%, respectively.

Overall, domestic sectors contracted by 1.8% in the quarter, while multinational-dominated sectors — which includes industries such as pharmaceuticals as well as the tech sector — declined marginally by 0.1%.

These sectors accounted for 43.9% of total value added in the economy, compared with a 56.1% share for all other sectors.

GDP shrank

Gross domestic product (GDP) shrank by 1% during the quarter. However, GDP is not a reliable measure of the Irish economy due to the presence of the many multinational companies that have significant operations here.

Compared to the same period last year, GDP is down 4%.

Investment in capital formation fell by 65.1%, or €15.5bn, over the three month period, which the CSO said reflected a “significant export of intellectual property” arising from a “global corporate restructuring in the multinational sector”.

Personal spending on goods and services grew by 1.1% during the quarter — up 1.3% on an annual basis — while Government spending on goods and services rose by 1.5%.

Finance Minister Jack Chambers said the fall in GDP “reflects the volatile nature of activity in the multinational sector”.

“In terms of the domestic economy, MDD declined on a quarterly basis, but recorded positive growth of 1.5% on an annual basis. I am pleased to see that consumer spending contributed positively to this growth, with consumption increasing by 1.3% on an annual basis,” he said.

“The growth in consumer spending, alongside robust exchequer figures released yesterday and the strength of our labour market highlights the relatively healthy position of our domestic economy at present.”