The National Accounts published on Friday show that the Irish economy put in another solid performance in the third quarter 2019 despite heightened Brexit uncertainty.
On Goodbody Stockbrokers preferred core domestic demand growth metric, the Irish economy grew by 2.9% year on year (yoy), with upward revisions made to both first quarter (3.7% yoy) and second quarter (3.2% yoy).
Consumer spending continued to grow at a steady pace (+3.3% yoy). Within this, growth in spending on goods (+4% yoy) exceeds that of services (+3% yoy) in volume terms but is being boosted by ongoing price declines.
In contrast, inflation is holding back volume growth in services, with price growth at more than a decade high of 4.6% in third quarter, reflecting the buoyancy of the domestic economy. Overall, Irish consumers continue to be aided by ongoing strong employment and earnings growth.
Core investment, which excludes R&D and aircraft leasing, stagnated in the third quarter (0.1% yoy in Q3, +1.2% in Q2). This marks the slowest rate of growth since the fourth quarter of 2012 and is unsurprising given the weak business sentiment at the height of the Brexit uncertainty. Within this, core business investment fell 8% yoy but this was offset by residential construction investment (+22% yoy), consistent with the recovery in completions.
In its fourth quarter Health Check, Goodbody Stockbrokers forecasted a bounce back in business investment in 2020 under the assumption of an orderly Brexit. Given this morning’s general election result, this assumption looks safe, thus Goodbody expect core investment to accelerate to 6% in 2020, up from 4% this year.
According to Goodbody Stockbrokers, "Core domestic demand looks set to grow in line with our estimate of 3.3% in 2019, while today’s conclusive election result in the UK reduces external risks for 2020. We are forecasting growth of 3.6% next year on the back of a bounce in business investment."
Source: www.businessworld.ie
