Irish GDP probably fell by 1-1.5% in the last quarter of 2020 compared to 3.2% in the second quarter of 2020, so GDP for the calendar year 2020 expanded by circa 3%, according to the latest Services Output Index.
However, Davy Stockbrokers have today warned that the fresh lockdown in January, with non-essential retail and construction closed and the 5km travel limit reinstated, will depress output again in early 2021.
Yesterday’s Services Output Index shows that the second lockdown in November had a far smaller impact on economic activity than in April and May. Services sector output was down 8.2% year-on-year in November, less than half of the 22-23% falls seen during the first lockdown.
Hence, Davy Stockbrokers expect Irish GDP fell by around 1-1.5% quarter-on-quarter in the last quarter versus 3% in the second quarter and will have expanded by 3% in calendar year 2020. Of course, output will have rebounded in December as restrictions were relaxed, but the lockdown resumed in January.
The annual contraction in output in accommodation (-91.5%) and food services (-53%) in November was equivalent to that during April because the COVID-19 restrictions were similar. However, the 4.9% fall in wholesale and retail trade was much shallower than the 27% decline recorded in April.
Professional and scientific (-17%), admin and support (-17%) and transportation (-22%) all saw substantial falls but less severe than in April and May. The multinational-dominated information and communications sector still saw output up 9.7% in November.
According to Davy Stockbrokers, "The fresh lockdown in January will have a more severe impact on Irish GDP. Non-essential retail is closed, the 5km travel restriction has been reinstated and construction sector activity will cease from this evening. In addition, there will be some disruption as firms adjust to the new Brexit trade arrangements."
They added, "Also, manufacturing activity was probably helped in late 2020 by higher orders and purchasing activity ahead of the December 31st Brexit deadline. That said, there may be an element of catch-up in spending and output later in 2021."