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High growth in Ireland. Five anomalies


The increase of nominal Irish GDP in the third quarter was 12%, YoY. Which is ‘whopping’. But I do not understand. I see at least five anomalies (anybody any ideas about this?):

  1. Total nominal wage growth (not yet published) must be about 5%, YoY (3% employment growth and 2% wage growth). Which is magnificent and good – but way below the 12% increase of GDP. Which means that ‘total profits and mixed income of the self employed’ has to be about +22% (assuming a wage share of 60%) to be consistent with 12% nominal increase of total income. Which is hard to believe, considering ‘2’.
  2. Households and non-financial companies are still deleveraging in a serious way when we look at ‘banks within Ireland’ (graph, source: Central Bank of Ireland). The 9% deleveraging of non-financial companies does not tally with 12% nominal growth at all.

    The 3% deleveraging of households is hard to reconcile with a 8% increase house price increase. Where does the money come from? Are households as well as non-financial companies borrowing from USA or French or German or UK banks (the Eurostat data on total lending and borrowing are alas not available for Ireland)? there has also been a car buying frenzy: where did the money come from?

  3. Looking at consumption and production data there have been extreme price and production swings when it comes to manufacturing production and (considering 12% nominal growth) extreme deflation when it comes to retail prices, deflation which also does not tally with the GDP data. By the way – seasonally adjusted production, consumption and exports have not really been increasing during the last three to six months.
  4. Investments are way up (about 100%) but as borrowing is declining the question is again: where does the money come from? This might be explained by intra company transfers but the problem is that the outflow of profits from Ireland to ‘abroad’ is rapidly increasing. Are intra company transfers of property rights counted as ‘monetary investment’ in intangibles?
  5. According to these data, productivity is exploding: +4% in one year. Which is possible for countries like Greece and India but which is pretty extreme for a high income country like Ireland.

What’s happening?


  1. December 11, 2015 at 11:15 am

    Some of the money might be coming from the stock market. The Irish stock market has been rising like crazy recently.


    That might well be a bubble.

    Then there might be some FDI.

    • Joseph Feredoes
      December 12, 2015 at 9:01 am

      Money coming from the stock market? How? Who pays to whom and where are the funds coming from? The stock market itself is not real … only digital entries in cyberspace. Yes, it becomes “real” only when “earnings” are withdrawn and this is time time to initiate a crash.

      • December 14, 2015 at 9:00 am

        Pension funds or whatever.

  2. December 11, 2015 at 11:37 am

    Also, yes, it looks like much of this was profits. Check out the GDP/GNP graph here:


    GDP growth looks like 7% y-on-y. Crazy for a developed economy. GNP growth looks more like 4% and it seems to be slowing.

    The Irish recovery is very reliant on the world recovery and will turn if the rest of the world turns. Still impressive though.

  3. anobserver
    December 11, 2015 at 3:19 pm

    Recently, I have seen questions about the internal consistency of national accounts pop up more frequently — and this concerns developed countries with well-functioning administrations, such as the Irish case presented here.

    As another example, there is a very recent post at flassbeck-economics.de on inconsistencies between GDP and tax data in Austria (see: http://www.flassbeck-economics.de/der-seltsame-umsatzsteuerschwund-in-oesterreich-und-die-probleme-amtlicher-berechnungen, in German) — raising the issue of either tax fraud in unprecedented scope, or of a substantial over-estimation of GDP over a long period of time.

    All of this does not look good. It is not just that the economic engine does not react as expected to whatever levers are being pulled (such as QE, lower input prices, etc), it also looks as if the dashboard indicators behave in odd ways that make it difficult to interpret what is really going on with it.

  4. December 11, 2015 at 7:51 pm

    Crazy? It’s much more than that.

  5. December 11, 2015 at 8:26 pm

    Would it be possible a mismatched timing accountability of foreign firms for any reason?

  6. Marko
    December 12, 2015 at 6:00 am

    The BIS private credit series in FRED shows 2.1 % y-o-y growth as of Q2/2015 , after a healthy rebound from an 8.6 % y-o-y rate of decline in Q3/2013 :


    • merijnknibbe
      December 12, 2015 at 2:25 pm

      Thanks! This is still low, but pattern as well as growth much more consistent with recent high growth. Means, at face value, also that the Irish are lending abroad to pay down domestic debt.

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