Press release
Multinational exports offset weakness in domestic economy in first quarter - Minister Donohoe
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Published on
Last updated on
The CSO today (3 June) published the Quarterly National Accounts for the first quarter of 2022. Commenting on the figures, Minister for Finance Paschal Donohoe said:
“While GDP growth was exceptionally strong in the first quarter, growing by 10.8 per cent compared with the previous quarter, part of this is no-doubt a ‘washing-out’ of some of the one-off factors that led to the unusual negative quarter at the end of last year. It is important also to put these volatile figures into context. GDP is not an accurate measure of what is going on in the domestic economy, given the size of the multinational sector.
"Today’s figures confirm a weak first quarter for the domestic economy as a result of numerous headwinds at the start of the year, including the Omicron-wave, inflationary pressures and the increased uncertainty related to the war in Ukraine. Modified domestic demand, our preferred measure of economic activity, decreased by -1 per cent in the first quarter.
"Consumer spending decreased by -0.7 per cent, as rising prices, in particular for energy products, impacted consumer purchasing power. While business investment was also weak in the first quarter, it is encouraging to see investment in new housing continuing to grow with the level of housing supply up by almost half compared to same quarter last year. Indeed, the 32,000 housing starts in the 12 months to April, point to the momentum in house building.
"Today’s numbers need to be considered alongside the very strong first quarter jobs numbers. We have a record 2½ million people in employment and the unemployment rate of 4.7 per cent in May is the lowest since 2006. Wages are rising, with total earnings up 2½ per cent on the quarter and 15 per cent compared to the first quarter last year according to today’s figures.
"Today’s release comes at a time of unprecedented geopolitical instability and uncertainty. The war and the subsequent waves of economic and financial sanctions represents a large ‘supply-side’ shock to the global economy. As a result, inflationary pressures have risen sharply, with the annual rate of inflation in May estimated at a multi-decade high of 8.2 per cent on the back of sharp increases in energy prices.
"The government has responded to help to ease the impact of these price pressures, with €2.4 billion in cost-of-living measures announced to date. However the causes of current price pressures are not within our control. Whilst the government will continue working to minimise the fall-out on those who are least-equipped to respond, resources are limited and we cannot cushion households and businesses from the entire impact of the current shock.
"The broad economic and fiscal parameters for Budget 2023 will be presented in the Summer Economic Statement. Once again the SES will take place against a backdrop of extraordinary economic challenges. However the strength of our labour market and continued improvements in the public finances confirm that we approach the current challenges from a position of strength. In calibrating how we respond to the current challenges, it is important that we strike the right balance and ensure policy doesn’t inadvertently add further inflationary pressures into the system.”
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.
Total employment in the first quarter of 2022 stood at 2,505,800 according to the CSO labour force survey.
GDP fell by -6.2 per cent on a quarterly basis in Q4 2021, driven by unusually large imports in the quarter.