Was the Irish election result a case of its the economy stupid?

Back in the day the presidential campaign of Bill Clinton came up with the phrase “Its the economy stupid” which worked on several levels. Firstly Bill got elected and secondly the phrase has echoed around since. But applying it to what has recently happened in Ireland is an example both of the phrase and the way we have these days to look beneath the official statistics.

Let me start the story by looking at GDP growth in Ireland.

On a seasonally adjusted basis, initial estimates indicate that GDP in volume terms increased by 1.7 per cent for the Q3 quarter of 2019. ( Central Statistics Office or CSO)

Something for an incumbent government to trumpet you might think and this continues with the annual comparison.

Initial estimates for the third quarter of 2019 indicate that there was an increase of 5.0 per cent in GDP in real terms in Q3 2019 compared with Q3 2018.

For these times that is quite a surge which puts Ireland far ahead of the Euro area average and the breakdown starts with a hint of a modern thriving economy.

 Information & Communication made the most positive contribution to the Q3 result, rising by 22.4 per cent with Agriculture recording an increase of 15.2 per cent.


The Taylor Swift lyric appears as we look at some of the detail though.

 Capital formation decreased by 55.3 per cent or €25.2 billion in Q3 compared with the previous quarter.

That is quite a drop but you see we find the cause here with a similar number popping up elsewhere.

 Imports decreased commensurately by 22.5 per cent (€24.2 billion) in Q3 2019 compared with Q2 2019.

These are not the only conventional metrics which are lost in a land of confusion as Genesis would put it.

Exports increased by 2.4 per cent which meant that overall net exports increased by €26.8 billion quarter-on-quarter.

As you can see the economic growth story starts well but then has collapsing investment which is a warning and collapsing imports which is another warning accompanied by a triumph for net exports giving a strong signal.

Now let me bring in some context which is that if we look at Gross Value Added for the Irish economy it was 49.1 billion in the final quarter of 2014 and 79.7 billion in the third quarter of last year on a chain-linked basis. How could you not be re-elected with those numbers? Well regular readers may recall early 2015 which saw a 25.6% quarterly jump.

There are two major issues here which I looked at on December 18th 2017,

Data from the Fiscal Advisory Council (FAC) show that 2.5% of the 5.8% rise in Irish GDP (gross domestic product) in H1 2014, or 43%, came from contract manufacturing overseas, that has no material impact on jobs in the economy. Dell, the PC company, books its Polish output in Ireland for tax avoidance purposes. ( Finfacts )

Manufacturing has boomed but some of it has been the type of contract manufacturing described above. Next comes this issue.

These figures were affected by reduced levels of research and development costs, in particular intellectual property imports.

There is a large impact from intellectual property which sees money wash into and out of Ireland on such a grand scale it even affects the Euro area national account breakdown.

These have led the Central Bank of Ireland to develop this to try and help.

GNI* excludes the impact of redomiciled
companies and the depreciation of intellectual
property products and of leased aircraft from
GNI. When this is done, the level of nominal
GNI* is approximately two-thirds of the level
of nominal GDP in 2016.

Wealth and Debt

According to the Central Bank of Ireland there is a strong position here.

Household net worth reached a new high of €800bn in Q3 2019, which equates to €162,577 per capita. Household debt continued its downward trend, falling by €176m in Q3 2019.

If we look into the detail I note the following and the emphasis is mine.

The increase over Q3 2019 was driven by improvements in both households’ financial assets and housing assets. Financial assets rose by €11.5bn, due primarily to increases in the value of insurance and pension schemes. Housing assets rose to €545bn, an increase of €8.2bn over the quarter, the highest it has been since Q4 2008. Household liabilities remained unchanged at €147bn.

There has been success here too.

Household debt stood at €135bn, its lowest level since Q3 2005. This equates to €27,453 per capita. Household debt has decreased by a third, or €67.8bn, since its peak of €202bn in Q3 2008.

We can see by default that Irish companies borrow quite a bit.

Private sector debt as a proportion of GDP decreased by 2.4 percentage points to stand at 239 per cent in Q3 2019

Or do they as are the companies Irish?

 It should be noted that private sector debt in Ireland is significantly influenced by the presence of large multinational corporations (MNCs) and that restructuring by these entities has resulted in extremely large movements in Irish private sector debt, particularly from 2014 onwards.


According to the official data there essentially has not been any in Ireland over the period we are looking at. The official Euro area measure was 101.8 last December after being set at 100 in 2015 so you can see I am guilty of only a slight exaggeration. But we are reminded of its flaw ( which even ECB policy makers are presently admitting) that is highlighted by this from the Irish Times on the 5th of this month.

House price growth is obviously one part of the equation; while it may be finally easing in Dublin, half a decade of double-digit growth has nonetheless pushed the cost of owning a home out of the reach of many.

Indeed as it goes on they have become both more expensive and unaffordable.

But in Ireland, and in many other countries across the globe, rising property prices have been compounded by wage stagnation. Pay rises have only returned in recent years and continue to significantly lag house price growth.

The inflation measure of the Euro area completely ignores the area of owner-occupied housing on the grounds of whatever excuse it thinks it can get away with.

Ireland has its own measure which tried to do better by including mortgage interest-rates but that valiant effort has been torpedoed by the advent of negative interest-rates and QE.

So here we see another problem for the official view as people are told there is no inflation and yet in Dublin the Irish Times tells us this.

Dublin has experienced the third-fastest rate of house price growth in the survey over the last five years, up by a staggering 61.9 per cent.

Although it has also had a relatively strong rate of income growth over the same period – up by 13.2 per cent – that still means there is a huge gap between the rates of increase.

In terms of house purchase real wages have not far off halved. No wonder people are unhappy and should be questioning the inflation data.

The official numbers do pick up rental inflation and both have it being around 17% since 2015. So even on the official data there has been a squeeze here too.


On today’s journey we have seen that the experience of an ordinary Irish person is very different to that of the official data. They are told it is a Celtic Tiger 2.0 but face ever more expensive housing costs and the concept of buying a home has changed fundamentally. Thus we see how what are fabulous looking metrics of surging GDP and virtually no inflation are for a type of virtual Ireland which is really rather different to the real one where housing costs have surged. This impacts in other sphere as for example national debt to GDP has plunged and Ireland has moved for being a recipient of EU funds to a net payer.

Context is needed as there have been economic improvements in Ireland for example the unemployment rate this January was 4.8% as opposed to the 16% of January 2012. Improved tax revenues have helped provide a budget with a surplus although this relies a bit on higher corporation tax from guess who?

14 thoughts on “Was the Irish election result a case of its the economy stupid?

  1. No doubt its a case of the plebs getting tired of being financially raped by the global central banks via QE and ZIRP, with their former govt being wholly complicit.

    Instead of voting for financial terrorists they’ve ticked the box of violent terrorists.

  2. Hi Shaun
    So Sajid Javid has quit leaving the new man little time before reading the budget statemant.
    But he’s from GS so no problem

    • Hi Midge

      It is worth reminding ourselves of the words of Matt Taibbi one more time.

      “The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

  3. Great blog, Shaun, as usual.
    The Irish CPI really only takes into account mortgage interest payments,” materials for repairs & decoration and house insurance” in measuring owner-occupied housing (OOH) costs. This is comparable, if somewhat narrower in scope to the approach used in the RPI prior to 1995. The current RPI has an accounting approach to OOH, including housing depreciation and transaction costs like estate agents’ fees, both of which would be sensitive to current house price changes. The depreciation component is consistent with a user cost approach to OOH. Inclusion of transaction costs is not, since these are capital outlays not consumption in national accounting terms. This may be why they have not been included in the Irish CPI, although they are, or should be, already including transaction costs such as estate agents’ fees and stamp duty (the latter not included in the RPI as one would expect) in the quarterly OOHPI series they produce for Eurostat. So the Irish CPI is not really sensitive to current house price changes at all. The housing component of the mortgage interest series is based on a 20-year moving average of housing prices, and its monthly or annual movement could well be in the opposite direction to current house prices. If the ONS ever does start publishing a monthly HCIC (HCI-Capital) on a timely basis, I suspect the Irish public would insist on their own national statistical institute publishing something similar. Unfortunately, the Irish CSO seems to suffer from the same “One index to rule them all and in the darkness bind them” mentality as StatCan. It views differences between their CPI and their HICP as nasty annoyances to be minimized rather than what one would expect given the quite different requirements for household-oriented and macroeconomic consumer price series.

    • re ” One index to rule them all and in the darkness bind them”

      I’ll re-phrase that for you…

      “One index to rule them all and in the darkness BLIND them”

      CPI = Creative Price Index



  4. Hi Shaun
    Clearly we have a similar housing cost problem
    as Ireland but the UK now has a chancellor who
    is ex vampire squid who accumulated millions
    from hedge funds and a billionaire father in law.
    Surely the perfect “Yesman” for Bo and Dom!

    • Hi JRH

      I did not have much of an opinion about Sajid Javid as he seemed to rise without achieving much. However I think he deserves some credit for refusing to be railroaded albeit it meant he had to fall in his sword metaphorically speaking.

      I wonder if it will lead to a change in the plans to put Imputed Rents in the RPI?

  5. Same old same old if you don’t mind me saying, as housing assets go up the proportion of household debt may decrease, but if houses fell in value the situation changes completely.

    But else what could go wrong in Ireland?

    Well its back the surge in coronavirus infection deaths in China the worst day yesterday new cases outside China. But it having a devastating effect in China manufacturers and its started to spread around the globe, JCP cannot access spare parts for its equipment and workers on short time.


    BBC -“The economic cost is rising in China and beyond”


    Would you like some popcorn forbin? but please wash your hands before you share my pack and don’t come round if you have a temperature or have a cough and sneeze.


  6. The Irish are suffering many problems in addition to unaffordable housing courtesy of one of the most grotesque asset bubbles ever seen, and rents in the major cities so high they are unable to even save for a deposit on an overpriced shoebox.

    These include a failing health service with long waiting lists, 50 euros to see your GP, 100 Euros to visit A&E without a doctors referral, high taxes, a revolt against uncontrolled mass immigration and an extremely high cost of living.

    But of course the rosy economic statistics above ignore all that and show everything is fine – it isn’t, and people are beginning to wake up to the fact that they are being lied to all the time about their declining standard of living and the rising cost of living being misrepresented in government figures, and government policies deliberately designed to maintain and support land and property prices, hence their willingness to vote for an ostensibly Marxist party as Sinn Fein!

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