The past week has seen a raft of very strong data published on the economy.
The highlight was the national accounts data for the first quarter of the year. These showed GDP up by 4.1% and GNP rising by 3.4% year-on-year.
Every GDP expenditure component, including personal consumption and government spending, registered positive annual growth, with a strong rise of 7.4% in exports. Business investment was very robust, increasing 40% year-on-year, while construction spending rose 8.8%.
Notably, there was a big jump in housing output, up 18% year-on-year, although in absolute terms, it remains at very subdued levels.
Exports have been the main engine of growth in the economy in recent years, most notably service exports. These have averaged growth of almost 8.5% per annum in the past four years.
The first quarter saw a rebound in goods exports. These fell last year as a result of a marked decline in output from the pharmaceutical sector following the expiry of patents on a number of key products manufactured in Ireland.
Industrial production data, though, show a marked rebound in manufacturing output in the first four months of 2014 as activity in the pharmaceutical sector picks up again. This was reflected in a 10% year-on-year increase in goods exports in the first quarter.
The one disappointment in the national accounts was the continuing sluggishness of consumer spending, up by just 0.2% year-on-year in the first quarter. Spending on goods rose strongly, increasing by 3.1%, but this was largely offset by a 2.2% fall in spending on services.
Overall though, the data indicates that the economy is now on a strong growth path. GNP rose 1.9% in 2012 and 3.2% in 2013 and this trend was maintained in the opening quarter of 2014.
Other figures released in the past week point to a continuing strong performance by the economy in the second quarter of the year. Retail sales — excluding the auto sector — were up by over 4% year-on-year in April/ May. Meanwhile, car sales rose by 24% in the first half of the year.
The strong growth of the economy has seen a big rise in employment over the past two years, with a marked drop in unemployment. This trend is continuing, with the jobless rate dropping to 11.6% in June, down from 12% in March.
Meanwhile, the Live Register fell by a further 10,000 during the second quarter.
PMI data, which are a good barometer of economic activity, have also been strong. The services PMI climbed to a seven year high of 62.6 in June, with the manufacturing PMI averaging an impressive 55.5 in quarter two. The construction PMI has been above 60 in the last three months.
Housing data has also been strong with a large increase in commencements and a big jump in completions up to May. House prices were up by 10.5% year-on-year in May, with Dublin prices rising 22%.
The strong performance of the economy is being reflected in the public finances, with underlying tax receipts €500m ahead of target. A sub-4% budget deficit looks increasingly likely in 2014. Only modest adjustments are likely to be required in the October budget to get the deficit below 3% of GDP next year.
The outlook looks increasingly favourable. Economic conditions in key export markets such as the UK, US, and Germany have improved considerably. On the domestic front, the austerity programme, which has been in place since 2008, is nearing an end.
Sectors which were very depressed, such as construction and retail spending, are starting to recover. Overall, the economy could grow by 3% to 4% annually in the next few years.
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