Export boom boosts Irish economy, but inflation is starting to bite
Multinational production boosted the economy in the first months of the year, but early signs were already showing that the cost of living crisis was weighing on many households, according to new official figures.
Data from the Central Statistics Office showed Ireland’s GDP grew at the fastest pace in Europe, almost 12%, in the first three months of the year compared to the previous quarter , thanks to the surge in exports by multinationals.
However, the picture was complicated as other measures of Irish economic performance suggested that rising consumer prices were significantly reducing household spending, even before the February 24 invasion of Ukraine.
The CSO figures show that personal consumption has fallen compared to the last quarter of 2021 and means that modified domestic demand – a more reliable measure of the situation of Irish households – contracted by 1% in the quarter.
Exports from multinational IT and pharmaceutical companies continued to boom, helping boost GDP growth, but consumer prices were already hurting household spending, Goodbody’s chief economist said, Dermot O’Leary. He said:
The CSO figures are the latest to confirm the huge contribution of multinationals, as exports and the well-paying jobs they provide have supported the economy for several years.
However, a slew of data over the past few weeks, including employment and Treasury tax returns, seems to show that the economic strength is much broader than just a handful of foreign multinationals, such as ‘Apple, Pfizer, and Google, which have major European operations in Ireland.
“It is not the first time that new data on economic growth have presented a confusing picture compared to the current conditions of the Irish economy,” said KBC Bank Chief Economist Austin Hughes, referring to the figures. of CSO’s GDP.
“The strength of the multinational sector is very apparent and appears to be firmly entrenched, but the weakness of domestically focused activity may be somewhat exaggerated,” Mr Hughes also said.
He said there were undoubtedly some households that held “substantial purchasing power”, but a lot depended on what type of job you were doing in Ireland.
Meanwhile, Treasury statements for the end of May released earlier this week showed government finances are in extraordinarily sound condition to shield vulnerable households from the cost of living crisis.
The Treasury has collected record amounts of revenue from VAT, income tax and corporation tax, dispelling fears that the Irish economy and in particular household spending will be hit hard by the worst price spike. for consumption for a generation.
Figures released at the end of May showed that the number of people in employment, at 2.5 million, had reached record highs and exceeded levels before the start of the Covid-19 crisis.