Minister McGrath welcomes confirmation that the domestic economy grew strongly last year

Modified Domestic Demand – a proxy for the domestic economy – grew by 9.5 per cent last year
consumer spending grew by 9.4 per cent the last year, an upward revision of almost 3 percentage points relative to previous estimates
GDP grew strongly by 9.4 per cent last year, but subsequently contracted by -2.8 per cent at the start of this year, reflecting the volatile nature of production in the multinational sectors
GNI - the key deglobalised measure of national income – grew by 6.7 per cent last year
for the first quarter of 2023, both modified domestic demand and consumer spending have been revised downwards from earlier estimates

The CSO today (14 July) published the National Accounts for last year and for the first quarter of 2023. Commenting on the figures, Minister for Finance, Michael McGrath, said:

“I welcome today’s data which confirm the strong post-pandemic rebound in the domestic economy last year.

“Despite multi-decade high rates of inflation, it is encouraging to see the very strong growth in both consumer and investment spending.

“Consumer spending increased by 9½ per cent last year, an upward revision relative to earlier estimates that is now more in keeping with robust VAT receipts. This performance reflects the strength of the labour market as well as the important role government supports have played in helping to mitigate the impact of inflationary pressure. As a result of the upward revisions last year, the reported growth rate in MDD and consumer spending in the first quarter this year have been revised downwards – both were essentially flat in the first quarter. That said, higher frequency data – such as the 3.8 per cent unemployment rate recorded in June – confirm the strength of the economy.

“Investment spending over the past year has also been particularly strong, with contributions from both the domestic and multinational sectors. Reflecting the delivery of nearly 30,000 houses last year, dwellings investment was up almost 40 per cent.

“I am also encouraged to see the strong and sustained investment by multinationals in the Irish economy, with machinery and equipment investment increasing by over 50 per cent last year, a massive vote of confidence in the Irish economy by the multinational sector despite the many challenges facing the global economy. This investment will boost the productive capacity of the multinational sector in Ireland and will bring with it employment and exports in the years ahead.

“Looking ahead, the strength of our labour market, rising consumer confidence and the easing in inflation, should all support growth over the remainder of the year. That being said, many of the headwinds to growth which existed at the start of the year remain ever-present. Our economy is still facing significant capacity constraints, particularly in our housing and labour markets, which are keeping non-energy inflation much higher than expected. Rising interest rates, have also placed a greater financial burden on businesses and households. Growth has also slowed in many of our key export markets, weighing on demand for Irish exports as a result.

“It is against this economic backdrop that the government set out its Budget strategy in the Summer Economic Statement last week. This strategy will allow us to, once again, strike the right balance in ensuring sustained investment in our public services and infrastructure while keeping our public finances on a positive trajectory; the strategy will also avoid a situation in which budgetary policy becomes part of the inflation problem.”

Notes

Modified (final) domestic demand, a proxy for the domestic economy, is the sum of personal and government consumption and investment, excluding investment in imported IP and aircraft for leasing. It also excludes changes in the value of stocks.

Modified Gross National Income (GNI*) is an indicator produced by the CSO that measures the size of the Irish economy excluding globalisation effects.