Wednesday, December 19, 2012

19/12/2012: Irish National Accounts Q3 2012 - part 2

As promised in my first post on Q3 2012 National Accounts, here are the details of the main components of Irish GDP and GNP with more short-term trends focus (first post focused on cumulated changes for the 9 months from January through September 2012).

Unfortunately, these short-term series are less impressive than cumulated series. Here's why.

First, consider GDP and GNP decomposition by sector of activity, expressed in constant market prices terms:

  • Agriculture, Fishing & Forestry (AFF) subsector posted €564 million worth of activity in Q3 2012, down €477.o million (-45.8%) on Q2 2012 and down €123 million (-17.9%) y/y. This marks the second consecutive quarter of y/y declines, which technically means that the sector is in a recession. AFF sector overall share of GDP is now 1.41%, so it is a minute contributor to the GDP dynamics.
  • Industry activity printed at €8,868 million in Q3 2012, down €1,659 million (-15.8%) q/q and down 4.0% y/y. Only about 1/4 of the overall decline in Industry activity came from Building & Construction sub-sector which posted another fall-off in Q3 compared to Q2 (down €17 million or -3.7% q/q and down 9.9% y/y). Overall Industry share of GDP is now at 22.15% so any movement in the sector activity is significant for headline GDP and GNP.
  • Distribution, Transport and Communications (DTC) sector expanded to €8,940 million in Q3 2012 (up €1,071 million or +13.6% q/q and up 1.8% y/y). The sector now accounts for 22.33% of GDP.
  • Public Administration and Defence (PAD) sector showed €37 million (+2.1%) q/q expansion in Q3 2012, printing at €1,823 million. Y/y the sector is down 4.1% (just €78 million in net reductions). The sector now accounts for 4.55% of our GDP.
  • Other Services - a sector accounting for 37.4% of our GDP - increased activity by €239.0 mln (+1.6%) q/q and are up 0.3% or €47 million y/y. 
  • Compared to Q3 2007: Agriculture, Forestry and Fishing sector activity is down 27.4% (-€213mln); Industry activity is down 12.8% (-€1,298mln), of which Building & Construction is down 63.1% (-€765mln); Distribution, Transport and Communications sector is up 25.8% (+€1,832mln); Public Administration and Defence is down 14.9% (-€318mln); Other Services are down €980mln or -6.1%.

The above chart shows GDP and GNP prints, which posted the following dynamics in Constant Prices terms:
  • GDP at constant factor cost (ex net taxes) was down to €36,043 million in Q3 2012 (-€865mln and -2.3% q/q). Y/y GDP at constant factor cost is up €272 million (+0.8%)
  • Taxes net of subsidies rose to €3,998 million (+€353mln and +9.7% q/q) and are up €48mln (+1.2%) y/y.
  • Thus, GDP at constant market prices was down to €40,041 million in Q3 2012 (down €512mln or -1.3% q/q) and up €320mln (+0.8%) y/y. Compared to 2007 levels, GDP is down 3.3% (_€1,3540mln).
  • Net factor income from abroad contracted by €154mln in Q3 2012 (-2.1% q/q) compared to Q2 2012 to -€7,069mln. Year on year outflows are down €859 million or -10.8%. However, net outflows abroad are still up 17.2% (€1,038mln) on 2007. Currently, net transfer from Ireland abroad amount to 17.65% of our GDP.
  • With reduced outflows to the rest of the world (primarily driven by falling transfer pricing by multinationals), our GNP in constant market prices still contracted by €358 million (-1.1%) q/q. In Q2 2012 it grew by €2,075mln (+6.6%) q/q. The robust growth in Q2 was partially offset by the decline in Q3. Year-on-year our Q3 2012 GNP is still up +€1,178mln (+3.7%). However, compared to 2007, Q3 2012 GNP is down €2,237mln (-6.4%).
As the result of the above, Irish GDP/GNP gap decreased slightly from 17.81% in Q2 2012 to 17.65% in Q3 2012.

Here are the components of the above expressed as indices, with Q1 2005 set at 100:

On seasonally-adjusted basis, expressed in Constant Market Prices terms:

  • Personal Consumption of goods and services rose €160mln (+0.8%) q/q and is up €367mln (+1.8%) y/y. However, this is not the first time that personal consumption increased since the beginning of the crisis. For example, it rose €335mln in Q1 2010-Q3 2010 and by €420mln in Q3 2011-Q4 2011. 
  • In real, seasonally-adjusted terms, our personal consumption of goods and services is now at the levels between Q4 2005 and Q1 2006. However, some of this 'support' for consumption is coming from significant price increases in state-controlled sectors, which are not linearly reflected in GDP deflators (price adjustments).
  • Net expenditure by central and local government decline €4 million to €6,204 million in Q3 2012 compared to Q2 2012 (-0.1% q/q) and is now down €172 million y/y (-2.7% y/y).
  • While Personal Consumption fell €3,013 million (-12.8%) in 2007-2012 Q3 on Q3, Government spending declined €1,132 million (15.4%) over the same period of time. At annualized rates, this means a decline of personal consumption contribution to GDP of some €12 billion per annum and a decline of Government spending contribution to GDP of some €4.5 billion per annum.
  • Irish Government expenditure in real terms is running at the levels comparable with Q1-Q2 2006, or a quarter ahead of where personal consumption rests. However, any biases induced to personal consumption upside from state-controlled price increases also act to generate superficially lower government spending reported here (as this is Net expenditure by the government, excluding taxes and receipts). In other words, the true difference between Government and private spending is most likely much wider than one quarter.
  • Gross domestic fixed capital formation improved in Q3 2012 compared to Q2 2012, rising to €3,962mln (+€315mln or €8.6% q/q), which resulted in an annual increase of €323mln (+8.9%) y/y. Still capital formation is down €7,432 million (-65.2%) on Q3 2007.
  • Our fixed capital formation is now running at just 40% of Q1 2005 levels.
  • Exports of goods and services rose 1.3% (+€567mln) in Q3 2012 compared to Q2 2012 (increase of €2,788mln or +6.7% y/y). Imports are up €1,005mln (+3.0%) q/q and are up €1,742 mln (+5.3%) y/y. Compared to Q3 2007, exports are now up 17.3% (+€6,598mln) and imports are down 1.2% (-€404mln).
  • Irish exports now account for 108.01% of our GDP and our imports are at 83.38% of GDP.

In seasonally-adjusted terms:

  • Irish GDP rose €310mln (+0.8%) q/q and €1,464mln (+3.7%) y/y, but GDP remains deeply below Q3 2007 levels (-€4,632mln or -10.1%).
  • Irish GNP shrunk €245mln (-0.7%) q/q and is up €1,909mln (+6.0%) y/y. GNP remains deeply below Q3 2007 levels (-€6,357mln or -15.8%).

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