GDP falls after contraction in key sectors

Domestic demand recorded strong growth of 2.3% between July and September

Total exports increased by 2.1%, up €4.4bn, during the third quarter, while total imports grew by 10.4%, up €14.7bn, over the same period.

Ireland’s gross domestic product (GDP) fell slightly during the period July to September, following a surge earlier this year, with the pharmaceutical heavy industry sector experiencing a contraction, the latest data from the Central Statistics Office (CSO) shows.

However, the domestic economy is still holding up well, with modified domestic demand (MDD), a broad measure of underlying domestic demand that excludes intellectual property and aircraft-related globalisation effects, growing by 2.3%, driven by capital formation.

According to the data, GDP fell by 0.3% during during the third quarter, with the globalised industry sector — which includes pharmaceutical companies — contracting by 0.7%. However, the other multinational-dominated sector, information and communications, posted an increase of 0.6% over the same period.

GDP is not very representative of the health of the Irish economy, as it is heavily influenced by the activity of the numerous multinationals with operations here.

Chief economist at AIB David McNamara said in the year to the end of September, Ireland’s economy was 11% larger due to the export surge seen in the first half of the year.

“GDP growth remains volatile, but is reflective of the shifts in global trade patterns caused by the imposition of US tariffs in 2025, and the emergence of weight-loss drug production in Ireland.” 

There was a mixed picture for domestically focused sectors.

There was strong growth recorded in financial and insurance activities, up 7.8%, as well as robust growth in agriculture, forestry and fishing, and the arts and entertainment sectors, which posted increases of 3.3% and 3.0% respectively.

However, there were contractions in construction and public administration, education, and health of 3.3% and 0.8% respectively.

Mr McNamara said domestic indicators pointed to “robust growth” so far this year.

“On an annual basis, MDD is 5% higher than the same period in 2024,” he said. 

In terms of expenditure, personal spending increased by just 0.1% while Government spending on goods and services grew by 2.1% quarter-on-quarter.

Capital investment during this period increased by €8.6bn, or 29.4%, compared with the previous quarter reflecting an increase in the value of physical changes in stocks and higher levels of investment in intangible assets which includes intellectual property.

Real wages declined by 0.1%, with the largest increase being seen in distribution, transport, hotels and restaurant sectors, up 4.6% during the quarter. This increase was offset by a fall of 3.8% in the construction sector.

Between July and September, €27.4bn was compensated to employees of Irish-owned enterprises, while €12.5bn was paid to those employed in foreign-owned enterprises.

Exports increased by 2.1%, up €4.4bn, during the quarter, while imports grew by 10.4%, up €14.7bn, over the same period. As a result, net exports decreased by 14.6% in the quarter.

Goods exports for the three months were valued at €99bn, while imports were valued at €43bn. Services exports were valued at €124bn while services imports were valued at €118bn.

Real gross value added to the total economy amounted to almost €145bn in the third quarter, with the multinational sector representing 53% of total gross value added while non-multinational sectors represented 47%.