Economy sees 3.5pc rise in GDP but pace of growth easing

THE economy grew by 3.5pc between July and September compared to the same time last year, signalling the pace of growth may be easing, official data shows.

And compared to the second quarter, the economy virtually stagnated, with gross domestic product (GDP) rising by just 0.1pc, according to the Central Statistics Office.

But analysts described the figures as impressive and expressed no concern over the slow quarter-on-quarter data.

Finance Minister Michael Noonan said the economy remained on track to crank out growth of 4.7pc this year. However, he warned that risks remained. “The economy continued to grow in the third quarter, albeit at a slower rate than the exceptional growth rates seen in the second quarter, and most importantly this growth is translating into jobs,” Mr Noonan said.

“The strong income tax and the VAT figures seen in the exchequer returns, coupled with the positive high frequency data, highlight the ongoing recovery in the Irish economy. However, the recovery should not be taken for granted and there are risks.”

Growth of just 0.1pc was recorded in the third quarter, meaning there was virtually no growth compared to the previous three months. And the annual figure of 3.5pc is considerably lower than the 7.3pc recorded in the second quarter.

Personal consumption was flat in both the quarter and year-on-year, with spending on goods up 3.9pc on the year being offset by a fall in services of 3.2pc. The latter is attributed to a fall in the cost of many services including gas and electricity. Year-on-year, capital investment rose by 7.8pc, although government spending fell by 1.4pc. Net exports were €1.54bn higher in the third quarter of the year compared to the same period in 2013.

Dermot O’Leary, Goodbody Stockbrokers economist, described the figures as impressive: “The data does not alter the view that the Irish recovery still has significant momentum that will mean it will continue to grow at a 4pc-plus clip in 2015 and 2016.”

Davy Stockbrokers said the economy was set to grow by 5pc this year, despite the figures. “The flat growth in the third quarter is not too concerning, reflecting volatility in the data and with other indicators suggesting that the recovery has continued through the second half of 2014,” said Davy analyst Conal MacCoille.

Alan McQuaid of Merrion Stockbrokers predicted GDP for the year as a whole to be slightly softer than other forecasts, at around 4.5pc. “Although the Eurozone as a whole is struggling, Ireland has benefited from its close trading ties with the US and UK, two of the strongest performers on the world stage this year,” he said.

“Competitiveness gains made against the rest of euro-land in recent years have also helped, but the most encouraging aspect is the pick-up in domestic demand.”

Ibec said the figures were weaker than expected. “Taking the first nine months of the year together, however, the recovery is still by far the strongest in Europe, and we continue to see a revival of the domestic economy,” said Ibec economist Fergal O’Brien.

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