Investment spurs domestic economy in second quarter

Padraic Halpin, Reuters

The Republic's domestic economy grew by 4.3 per cent quarter-on-quarter from April to June, data showed on Friday, mainly driven by a pickup in investment in items such as plant and machinery as consumers also began to spend again on services.

Modified domestic demand (MDD), which strips out some of the ways the large multinational sector distorts measuring economic activity, was 10.6 per cent higher than in the same period in 2021 when the economy was emerging from a strict lockdown.

MDD had fallen by 0.1 per cent quarter-on-quarter in the first three months of the year.

Gross domestic product (GDP), a broader measure of economic activity, grew by 1.8 per cent on the quarter and was 11.1 per cent higher year-on-year. The Government has long cautioned against using this measure as it is routinely inflated by multinational activity.

The domestic economy expanded by 5.8 per cent in 2021. In April the Department of Finance cut its forecast for growth this year to 4.2 per cent from the 6.5 per cent it had expected late last year before inflation began to rise sharply.

Minister for Finance Paschal Donohoe said that while the jump in private sector investment was particularly heartening, momentum in the economy has eased and that the outlook for the coming months had "weakened considerably."

Friday's data – which came on the back of unemployment falling to a two-decade low of 4.3 per cent and tax receipts rising to a fresh record level – also showed that exports grew by 3 per cent in the quarter, with construction up 2.7 per cent.

While retail sales have fallen for three straight months to July, Friday's Central Statistics Office (CSO) data suggested this was partly due to consumers spending more on services after all Covid-19 restrictions were lifted early in the year.

Growth in services expenditure of 3.3 per cent pushed personal spending on both goods and services up 1.8 per cent quarter-on-quarter.

However higher prices are pulling down the real effects of consumption, the CSO said, noting that while consumers spent 12.4 per cent more on goods and services year-on-year, they only got 5.6 per cent more in terms of volume of goods and services.

Inflation hit a near 40-year high of 9.1 per cent in Ireland last month.