Thursday, September 19 14:39:35
Weaker than expected GDP data released today by the CSO could weigh on the Government's economic growth forecasts, according to an analysis from Investec.
Irish GDP recorded quarterly growth of 0.4pc (seasonally adjusted) in Q2 2013. After a very weak Q1 2013 (in which GDP fell 0.6pc quarter-on-quarter), a rebound in activity was expected, though the size of the rebound is slightly disappointing. On an annual basis, GDP remained in negative territory in Q2 2013, declining 1.2pc on year-earlier levels (Q1 2013: -1.0pc year-on-year).
The sequential growth recorded in Q2 2013 was driven by consumption (+0.7pc qoq) and exports (+4.3pc qoq).
Within exports, goods exports grew 3.8pc qoq (Q1 2013: -5.4pc qoq) and services exports expanded by 2.6pc qoq (Q1 2013: flat), in line with recent PMI readings. Imports also rebounded from a weak Q1 2013 (-0.6pc qoq), increasing 0.7pc qoq. Government expenditure and investment continued to weigh on growth, posting quarterly declines of 1.3pc and 3.4pc respectively. We note that investment in other transport equipment (mainly planes), which primarily relates to Ireland's aircraft leasing sector, recorded a multi-year low in Q2 2013.
The CSO published Q2 balance of payments data alongside the national accounts, showing a current account surplus of E2,900m in Q2 2013, up from E1,196m in Q1 2013 and E2,869m in Q2 2012. The rolling four quarter current account surplus is running at 5.6pc of GDP, though this is somewhat exaggerated by distortions arising from multinationals tax domiciled in Ireland.
Speaking about the data, Philip O'Sullivan, Investec Chief Economist, said, "All in all, this morning's data were marginally disappointing, with quarterly growth of 0.4pc below expectations (though we would reiterate the impact of the drag from aircraft leasing). Momentum has clearly picked up over the subsequent summer months, with both domestic demand (due to continued growth in employment) and exports (due to strengthening activity in key trading partners) set to improve in H2 2013. In order to record positive annual growth this year, the economy would need to grow by 1.1pc yoy in H2 2013."
"In terms of the read-through for next month's Budget, much will depend on the government's revised forecasts for GDP growth this year and next. The official forecasts, which forecast full year growth of 1.3pc this year, have not been updated since April and, as such, are due to be cut (for reference, we are currently forecasting growth of 0.7pc for the full year 2013). Insofar as today's weaker-than-expected GDP data could weigh on the government's economic growth forecasts, they could be said to lower the possibility that the government significantly deviates from the original fiscal consolidation plan. September's Exchequer Returns (due for release on Wednesday, October 2nd) will also play an important role in that regard."