Can we make any sense of the GDP data for Ireland?

Firstly let me wish everyone a Happy St.Patrick’s day as we also wait for England versus Ireland in the Six Nations rugby tomorrow. In that spirit let us immediately open with some good news. From the Irish Central Statistics Office or CSO.

Preliminary estimates indicate that GDP in volume terms increased by 5.2 per cent for the year 2016. GNP showed an increase of 9.0 per cent in 2016 over 2015.

On a seasonally adjusted basis, constant price GDP for the fourth quarter of 2016 increased by 2.5 per cent compared with the previous quarter while GNP increased by 3.2 per cent over the same period.

What grew? Well pretty much everything.

Building and construction recorded an 11.4 per cent increase in real terms and manufacturing recorded a 1.8 per cent increase . The distribution, transport, software and communications sector increased by 7.8 per cent while the agriculture sector increased by 6.2 per cent, and other services by 6.0 per cent. Public administration and defence recorded an annual increase of 4.4 per cent.

Looking ahead

The good news theme continues as we peruse the business surveys.

The latest Investec Services PMI Ireland report shows that business activity continued to increase sharply during February, with the rate of expansion only slightly weaker than January’s seven-month high. The headline PMI came in at 60.6, versus 61.0 in the previous month.

As we look around we do not get many readings in the 60s so let us look at manufacturing.

The latest Investec Manufacturing PMI Ireland report shows a further solid improvement in business conditions, albeit the pace of growth has slowed for a second successive month. The headline PMI was 53.8 in February, down from 55.5 in the preceding month.

So good numbers especially in the services sector although with the nature of these surveys they are less reliable than in larger countries as we have seen before on occasion in Ireland with the example of a cut in pharmaceutical production ( Lipitor going off-patent) which was missed.

Also in the circumstances this raised a wry smile.

On the latter, we note that panellists again highlighted the UK as a particular source of demand.


A consequence of the better economic data has been this.

The seasonally adjusted unemployment rate for February 2017 was 6.6%, down from 6.7% in January 2017 and down from 8.4% in February 2016.

This represents quite an improvement on the 10.1% of February 2015 and a vast improvement of the 15.2% of January 2012. It is not yet back to the pre credit crunch lows, however, which were around 2% lower.


Here is an interesting combination with the good news above as you see central bankers will have a mind block because Ireland has not had inflation for some time.

Prices on average, as measured by the EU Harmonised Index of Consumer Prices (HICP), increased by 0.3% compared with February 2016.

Actually I am slightly exaggerating but if we use the Irish CPI and base it at 100 in 2011 then it was 101.5 in 2016. Even worse for the inflationoholics who run central banks and of course the media who copy and paste such views it was possible for relative prices to change.

The sub index for Services rose by 2.0% in the year to February, while Goods decreased by 1.5%.

So if low/no inflation has been good for Ireland how does it feel about the European Central Bank determination to push it higher? I forecast good news from this back on the 29th of January 2015.

However if we look at the retail-sectors in the UK,Spain and Ireland we see that price falls are so far being accompanied by volume gains and as it happens by strong volume gains.


In spite of the official news being good there are signs of what Taylor Swift would call “Trouble, trouble,trouble” if you look below the headlines. The Irish Times pointed out this last December.

The fact that more than 6,000 people, including children, are now officially “homeless” and living in emergency accommodation in hotels, guesthouses and charity shelters is offensive……….It flows from policy decisions and political collusion that created a deeply unequal society.

Focus Ireland counted 7148 and pointed out that the number was up 40% over the past year and was likely to be under recorded. There are other issues in this sector as we look at the sale of property by the bad bank NAMA. Firstly the excellent NAMA Wine Lake is critical of the accountancy at play here.

NAMA acquired €74bn of loans for €32bn. The NAMA “profit” is on the €32bn acquisition price. We bailed out the banks for the €74bn-€32bn.

How is that going?

NAMA lost £190m on £4.5bn par value Project Eagle sale. How much will NAMA lose on (average of) €50m loans it will sell in next 24 hours?

Also there is the issue of all this apparently surplus property being traded around whilst people are homeless on an increasing scale.

House Prices

These are of course ignored by the consumer inflation numbers although of course not by anyone wanting to buy a house. Signs of problems are clear.

In the year to January, residential property prices at national level increased by 7.9%. This compares with an increase of 7.9% in the year to December and an increase of 5.6% in the twelve months to January 2016.

If we look for some perspective we see this.

From the trough in early 2013, prices nationally have increased by 49.6%. In the same period, Dublin residential property prices have increased 65.2%………..Overall, the national index is 31.8% lower than its highest level in 2007. Dublin residential property prices are 32.4% lower than their February 2007 peak,

What might be wrong with the official data?

There is an obvious concern with GDP (Gross Domestic Product) rising by 21% in one quarter as it did at the opening of 2015. I have covered this before so this time let us examine the view of the Central Bank of Ireland from its Quarterly Bulletin.

However, this masked offsetting trends in the components of GDP, in particular investment and trade, which were not closely aligned with indicators of activity in the domestic economy, but were mainly accounted for by the off-shore activities of multinational firms.

If we return to the official data what did happen to recorded investment in Ireland in 2016?

On the expenditure side of the accounts (Table 3), capital formation rose strongly by 45.5 per cent during 2016.

There is more.

The potential for volatility in the measurement of Irish GDP reflects the fact that parts of the output recorded in Irish GDP now reflects activity which takes place in other countries.

When you consider that the numbers are supposed to represent Ireland and its economy this confession is really rather extraordinary.

In the trade data, for example, changes in the level of contract manufacturing abroad by multinational firms can have a significant impact on exports and imports.

If we look at the data for the last quarter of 2016 there is this.

On the expenditure side there was a decline in net exports of €17,396m (93.7 per cent) during the quarter, largely driven by higher imports (37.2 per cent).

Actually the higher investment and import numbers often represent the same things.

The central bank also looked at the economic impact of Aircraft Leasing where the sums are enormous even for these times.

Assuming that the industry in Ireland is to continue to account for some 50 per cent of the leased output (as per current estimates), this would imply approximately €1.4 trillion ($1.5 trillion17)in new assets – either acquired or via finance leases inward – held by the sector in Ireland

Yet in terms of actual action this generates ” a certain degree of employment and tax revenues ” in reality so how much then? Over 1200 and 300 million Euros a year which are no doubt very welcome but poses a question for measurement.


The Irish situation opens more than one can of worms. Has the economy grown in recent years? I think so but the data poses lots of questions and let me highlight this with something from the CSO. In response to the issues above it thinks that Net National Product or NNP may help because it allows for depreciation and thus takes out much of the cross-border flows. So is Ireland’s annual economic output 255.8 billion Euros ( GDP) or 202.6 billion Euros (GNP) or 141.1 billion Euros (NNP)? The numbers are for 2015 but also was economic growth 32.4% (GDP) or 24% or 6.4%?

Also how do we relate the national debt to economic output? Perhaps as we have discussed before the best measure is to compare it to tax revenue.


12 thoughts on “Can we make any sense of the GDP data for Ireland?

  1. Shaun, Ireland’s economy is going well and good luck to them in the rugby – they’re going to need it! I wonder when the EU will come calling for additional budget contributions based on the higher GN – those hookers, drug dealers and foreign companies are paying their fiar share of taxes, right?!.

    • Hi DoubtingDick

      According to the Irish Times last May there have already been ch-ch-changes.

      “After receiving more than €42 billion in 40 years from Europe, Ireland quietly paid more into the EU budget than it received for the first time three years ago. A €53 million net contribution in 2013 was followed by another net contribution in 2014, estimated at €176 million.”

      And looking ahead…

      “London’s net contribution after rebates in 2014 was €7.1 billion, so a departure from the EU would present a major challenge to the remaining members…….However, Ireland’s strengthening relative economic growth, which increases gross national income, is expected to increase our EU budget contribution, eroding some of these savings (from cheaper debt costs).”

  2. Shaun, nice to see Ireland doing economically well despite euro membership. Plenty of politicians in struggling eurozone countries are ready to blame the currency -> not their own countries failings.

    However the Irish are failing on housing. When this is left to the free market you get wild booms and busts, people priced out of decent housing, and risk of housing poverty / substandard slums. So the question for Ireland is how to regulate & reform residential property, otherwise they will just repeat 2008 in another property boom/bust.

    • Hi ExpatInBG

      There are indeed signs that things are not going so well. For example with economic growth as it is then Ireland does not need all the stimulus being provided by the ECB and the danger is that it goes into asset markets such a housing all over again.

      Also there is the issue of privatisation of profits and socialisation of losses which NAMA is seemingly making worse right now.

      So more than a few changes would be needed I think.

  3. Can we make any sense of the GDP data for Ireland?

    Good god , I can’t make sense of OUR GDP figures since the EU broke them !

    fairy dust and sheep worrying were added 😉

    I guess we’ll have to fall back to electricity consumption and tax receipts

    or the Crane Index …………….


    PS: I guess we could count popcorn consumption too

  4. When trouble struck in c2009 the UK advanced quite a few £billions to Ireland to help keep them afloat, a matter obviously of concern to UK!
    Well, I hope this interest free goodwill gesture will now be repaid in the light of all this good news as our own Treasury now struggle for funds.
    Is the UK Treasury awake I wonder?

  5. I have it on good authority that the Irish GDP figures are produced by vertically challenged green men, who have a habit of giggling a lot and then disappearing!

    • Hi Foxy

      I feel sympathy for the statisticians who find themselves at the mercy of events. They had no control over the changes nor the way that Ireland would make itself a low tax economy looking for foreign investment. I remember the building of the “tax free” district in Dublin in the 90s.

      Now as the funds slush around they make a big impact partly because it is a relatively small economy.

  6. Hi Shaun
    Thank you for enlightening us on the rabbit
    warren methods of calculating Irelands statistics.
    If you recall, ten days ago I e-mailed the
    BOE to ask where I might find the commission elements
    of the Gilt edged money makers (GEMMs). Late today I
    received a reply suggesting that I contact the Debt
    management office (DMO), apparently they have handled
    guilt issuance on behalf of the BOE since 1997/8. I will
    try to get information from them and will presumably get
    a reply within a fortnight!


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