Home > Uncategorized > Bewildering Irish GDP data once again (but employment data are sound)

Bewildering Irish GDP data once again (but employment data are sound)

ierland3The new quarterly  Irish GDP statistics are in. They are, again, bewildering. Ireland grows because investments are down…. I’ll explain. On the one hand we read:

  • ‘Overall total domestic demand declined by 1.8% in Q3 2016 compared with Q2 2016.’. This decline was led by a 17,8% decline in investments.

On the other hand we read:

  • The National Accounts results show an increase of 4.0% in GDP and an increase of 3.2% in GNP in Q3 2016 compared with Q2 2016

A heft growth of GDP in combination with a serious decline of domestic demand can only be caused by super-buoyant net exports. Which is what happened:

  • Net exports increased by €6.4 billion in Q3 2016, however this is largely explained by lower imports of intellectual property products and a consequent fall in capital formation of 17.8%

Read: there were less intra-company transfers of Microsoft patents from the USA to Ireland. This turns up as an increase of net (!) exports which increases GDP. Hmmm,,,

As I’ve stated before, in the Irish case it is better to look at the labor market statistics to get an idea of what’s happening: construction and tourism (accommodation and food service in the graph as well as a chunk of transport) are booming (industry grows even more but this is to a considerable extent caused by the production of construction materials)

  1. Neville
    December 11, 2016 at 1:31 am

    Another reason why GDP is no longer a true yardstick to measure growth! Total income is the way to go; Y = C + I + G + (X – Z )
    C = consumer spending
    I = Investment (direct and capital transfers)
    G = Government expenditure
    X-Z = net exports/imports

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