Thursday, September 18, 2014

18/9/2014: Irish GDP & GNP Q2 2014: Headline Numbers

In the previous post ( I covered sectoral decomposition of Irish GDP. Note, referenced activity in the above post and GDP are 'at factor cost', omitting taxes and subsidies.

Here, let's take a look at full valuations of real GDP and GNP, both seasonally-adjusted (allowing q/q comparatives) and seasonally un-adjusted (allowing y/y comparatives).

Starting with seasonally un-adjusted series.

Total real GDP (in constant prices) in Q2 2014 stood at EUR45.763 billion which is 7.72% above the levels recorded in Q2 2013 and marks second consecutive quarter of y/y growth (in Q1 2014 GDP expanded by 3.81%). Q2 2014 y/y growth rate in GDP is highest since Q1 2007 which is a huge print!

Profit taking by the MNCs accelerated to EUR8.016 billion in Q2 2014from EUR7.864 billion in Q2 2013 and GNP rose to EUR37.747 billion posting a y/y growth rate of 9.03% in Q2 2014, marking fourth consecutive quarter of GNP growth. The Q2 2014 y/y growth rate was the highest since Q2 2006. The level of GNP in Q2 2014 was the highest for any Q2 since Q2 2007. So we have another huge print here.

GNP/GDP gap at the end of Q2 2014 stood at 17.5%, which is worse than the gap of 16.9% in Q1 2014 but an improvement on 18.5% gap in Q2 2013. Excluding taxes and subsidies, private GNP/GDP gap reached 19.0% in Q2 2014 compared to 20.1% in Q2 2013. This means that while growth is improving domestic economic conditions, these improvements are not tracking in full overall economic activity.

In seasonally-adjusted terms, Irish economy's performance was more moderate, albeit still strong, than in y/y growth terms discussed above.

Q/Q, GDP grew by 1.54% in real terms in Q2 2014, marking a slowdown in growth from 2.79% q/q growth in Q1 2014. However, Q2 2014 marks second consecutive growth period and the first time we have posted a GDP outcome above EUR45 billion (EUR45.611 billion in fact) in any quarter since Q2 2008.

Q/Q GNP marked fourth quarter of expansion in a row with Q2 2014 uplift of 0.61% on Q1 2014, ahead of Q1 2014 growth of 0.38%. However, Q2 2014 growth was second slowest in last 4 quarters. In level terms, Q2 2014 seasonally-adjusted real GNP came in at EUR37.983 billion which is the best Q2 reading since Q2 2008. So despite growth moderation, levels performance is still relatively good.

Here are two charts plotting relative performance by quarter in terms of GDP and GNP compared to historical average growth rates for each decade.

More analysis to follow, so stay tuned.


Anonymous said...

Constantin, I'm curious about one thing, as these figures seem a bit too good to be true. I read somewhere that many countries have recently started adding Black Market estimates to GDP (helps to get headline borrowing ratios down!). If this is now the case for Ireland, and it wasn't there a year ago, is this a like-for-like comparison?

TrueEconomics said...

Yes, parts of the current growth figures reflect changes in methodology used in computing GDP. New methodology is not yet deployed by all member states of the euro area, so we can't quite compare across all states. And we cannot compare to pre-change levels either as we are not being given separate figures for new activities (illicit trade etc) and other reclassifications as stand alone figures. So we cannot tell how much of the current growth (Q1 and Q2) is down to the above changes and how much dow to actual growth.

I wrote about this before here:

Anonymous said...

Constantin, thank you. It would be fascinating to know how much of the change was as a result of methodology changes alone and, in particular, how much was due to the addition of Black Market activities. Lies, damned lies etc. I'll take a read of your previous article now.