Friday, December 17, 2010

Economics 17/12/10: Q3 2010 National Accounts - part 2

This is the second post on the QNA data for Q3 2010.

Let's take a look at three more dynamic sectoral components of GNP.
Services and industry are now pulling in different directions, which means the proverbial glass on growth is really half-full (or half-empty). Amazingly, construction sector continues to shrink. This is even better illustrated as the sector share of domestic economy:
Now, recall that PMIs for construction sector for November showed continued monthly contraction in sector activity, led by civil engineering (as the rest of the sector has already shrunk by well over 80%). 2011 forecast for new homes completion is now around 9,000 units - and in my view that too is rather optimistic. This means we can expect more bad news out of the sector with a continued knock on effect onto auxiliary services and materials sectors.

Taking a look at GDP and GNP in current prices terms:
For the second quarter in a row, the value of Irish exports was in excess of the value of the country GDP (by 2.94% in Q3 - down from 3.03% in Q2, while in Q3 2009 it was 11% below the level of GDP). Undoubtedly, weakening euro helped here.

Again, in current prices, consumers are still striking, while capital investment has gone even deeper into the negative territory, so that the very partial replacement of amortized stocks that gave it a temporary boost in Q2 before has been exhausted. Government spending is not showing much of a decline.
Take a look at quarterly rates of change in the above components:
We are now an economy that consumes its capital stock, not the one that adds to it for future growth.
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