Gross domestic product (GDP) grew 11% year-on-year in the second quarter as the economy rebounded following the easing of Covid-19 restrictions, according to the latest quarterly national accounts.
Figures from the Central Statistics Office (CSO) show that GDP, which accounts for the profits of multinationals based in Ireland rose 1.8% in the second quarter alone, with GDP in multinational-dominated sectors growing 6% and all others increasing just 0.9%.
The globalised industry sector, excluding construction, expanded by 5% in Q2 compared with Q1, while IT increased 4.9% over the same period. Multinational-dominated sectors accounted for 54.8% of total value added in the economy, compared to 45.2% in all other sectors.
Gross national product (GNP), which excludes multinational activity, increased 2.1% quarter-on-quarter, and modified domestic demand, a broad measure of underlying domestic activity covering personal, government and capital formation spending, rose 4.3% in Q2.
On an annual basis, modified domestic demand grew 10.6% between April and June compared to the same period last year. Similarly, in the first half of the year, MDD increased 11.7% year on year.
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In the domestic economy, sectors such as construction (+2.7%), and distribution, transport, hotels and restaurants (+1.5%) expanded during the quarter, but there were quarterly declines in professional, administrative and support activities (-0.3%), finance and insurance (-0.4%) and agriculture, forestry and fishing (-0.3%).
Commenting on the figures, Minister for Finance Paschal Donohoe said: “While the figures show year-on-year GDP growth of 11% in Q2, today’s release confirms that the domestic economy rebounded strongly as Covid restrictions were finally removed.
“Modified domestic demand, the preferred measure of domestic economic activity, increased by 4.3% in the second quarter and now stands at 9% above the pre-pandemic level recorded in the fourth quarter of 2019.
“This is the first quarter in which consumers were uninhibited by pandemic-related restrictions and it is encouraging to see the rebound in activity, with consumer spending growing 1.8 per cent over the quarter. Indeed consumer spending essentially returned to pre-pandemic levels in the second quarter, a very notable outcome.
“The robust consumer spending growth is also reflective of the buoyant labour market conditions, with a record level of well over 2.4m people at work. These trends are also in-line with strong growth in VAT and income taxes recorded so far this year," he added.
"Earlier this week, data showed that the unemployment rate was just 4.3% in August – so we are seeing very low unemployment and strong employment even after the Covid supports were removed; this is very encouraging.
Investment in capital formation rose 17.9% driven by investment in non-aircraft leasing related machinery and equipment and in intangible assets.
Government spending on goods and services rose 2.7%, while personal spending was up 1.8% but 1.7% below the peak pre-pandemic level three years ago, and net exports of goods and services fell 1.8% or €900m in the second quarter.
The current accounts of the balance of payments recorded a surplus of €14.8bn in flows with the rest of the world, a decline of €500m from the €16.4bn surplus recorded in Q2 2021.
"The merchandise balance improved by €8.9bn in Q2 2022 compared to the same quarter in 2021 while the Services balance disimproved by €2.2bn," said Jennifer Banim, assistant director general with responsibility for economic statistics at the CSO.
"Net outflows of multinational profits were €29.3bn in the quarter, an increase of €5.3bn on Q2 2021 levels.”
Minister Donohoe also said he was conscious of indicators suggesting economic momentum had eased and that global inflationary pressures resulting from the war in Ukraine were eroding real incomes and growth prospects.
"The government is committed to tackling the cost of living challenges head on and the forthcoming Budget will set out a range of supports to help alleviate the inflationary pressures on society," he continued.
"In doing so we must strike a balance between protecting the most vulnerable households and firms from a once-in-a-generation energy price shock, while at the same time ensuring that policy doesn’t worsen the inflationary cycle.”
(Pic: Getty Images)
