12/12/15: Irish National Accounts 3Q: Post 6: Measuring Recovery

In previous posts, I have covered:

1. Irish National Accounts 3Q: Sectoral Growth results 
2. Year-on-year growth rates in GDP and GNP in 3Q 2015 
3. Quarterly growth rates in GDP and GNP 
4. Domestic Demand and
5. External trade side of the National Accounts 

Now, as usual, let’s take a look at the evolution of 3 per-capita metrics and trace out the dynamics of the crisis.

In 3Q 2015, Personal Expenditure per capita for the last four quarters totalled EUR 19,343, which represents an increase of 2.78% on four quarters total through 3Q 2014. Relative to peak 4 quarters total (attained in 4Q 2007), current levels of Personal Expenditure on Goods & Services on a per capita is 7.14% below the peak levels. In other words, 7 and 3/4 of the years down, Personal Expenditure on a per capita basis is yet to recover (in real terms) pre-crisis peak.

Per capita Final Domestic Demand (combining Personal Expenditure, Government Expenditure and Fixed Capital Formation) based on the total for four quarters through 3Q 2015 stood at EUR 34,616, which represents an increase of 7.75% y/y. This level of per capita Demand is 11.19% lower than pre-crisis peak attained in 4Q 2007. As with Personal Expenditure per capita, Final Demand per capita is yet to complete crisis period recovery, 7 and 3/4 of the years down.

On the other hand, GDP per capita stood at EUR 42,870 on a cumulative 4 quarters basis, which is 6.2% above the same period for 2014 and is 0.98% above the pre-crisis peak (4Q 2007). Hence, GDP per capita has now fully recovered from the pre-crisis peak and it ‘only’ took it 7.5 years to do so.

GNP per capita has recovered from the crisis back in 2Q 2015, so at of Q3 2015, 4-quarters aggregate GNP per capita stood at EUR 36,508 which is 5.85% ahead of the same period through Q3 2014 and is 2.39% above pre-crisis peak. In other words, it took 7 and 1/4 years for GNP per capita to regain its pre-crisis peak.

It is also worth looking at the potential levels of output per capita ex-crisis.

To do so, let’s take average growth rates for 4 quarters moving aggregate GDP. GNP and Domestic Demand, for the period 1Q 2002 through 4Q 2007. Note 1: this period represents slower rates of growth than years prior to 1Q 2002. Note 2: I further removed all growth rates observations within the period that were above 5 percentage points for GDP and GNP and above 4% for Final Demand, thus significantly reducing impact of a number of very high growth observations on resulting trend.

Here is the chart, also showing by how much (% terms) would GDP, GNP and Domestic Demand per capita have been were pre-crisis trends (moderated by my estimation) to persist from 4Q 2007:

I’ll let everyone draw their own conclusions as to the recovery attained.

1/8/15: Irish 1Q 2015 Growth: Recovery on Pre-Crisis Peak

In previous posts, I have looked at:

• Sectoral growth contributions for 1Q 2015;
• Trends in annual (y/y) growth rates in GDP and GNP;
• Quarterly (q/q) growth rates; and
• Domestic Demand component of GDP.

So now, let's try to answer that persistent question: has Irish Economy regained pre-crisis peaks of economic activity?

To do so, we need two things:

1. We need 12-months running sum of total activity measured by GDP (mythical metric for Ireland), GNP (increasingly also mythical metric, but slightly better than GDP); and Final Domestic Demand (basically an approximation for the real, domestic economy); and
2. We need population figures to get the per-capita basis for the above metrics.

We can compute all metrics in (1) based on actual CSO data. But we cannot know exactly our population size (CSO only provides estimates from 2011 through 2014 and no estimates for 2015). So I did a slightly cheeky approximation: I assumed that 2015 will see increase in Irish population of similar percentage as 2014. This is cheeky for two reasons: (1) population change can be slightly more or less than in 2014 due to natural reasons; and (2) emigration might be different in 2015 compared to 2014. Specifically, on the second matter, there has been some evidence of slower emigration out of Ireland and there have been some migrants coming into Ireland on foot of MNCs hiring.

Still, this is as good as things get, so here are the numbers, all referencing inflation-adjusted (real) variables:

Irish Personal Consumption per capita (not shown in the chart above) on 12 months total through 1Q 2015 stood at around EUR19,074.79 or 8.4% lower than pre-crisis peak in 4Q 2007. Meanwhile, Final Domestic Demand per capita was some 15.43% below pre-crisis average. Irish GDP per capita was around 2.4% lower than at pre-crisis peak. However, Irish GNP per capita in 1Q 2015 based on 12 months total was 0.2% above pre-crisis peak.

So in simple terms, by one metric of three, we are back at pre-crisis peak levels in per capita, inflation-adjusted terms. This metric is somewhat better than GDP per capita, but not perfect by any means and is getting worse, not better, in terms of measuring the real activity on the ground. Still, after 8 years, the recession cycle is complete in terms of GNP. It is still ongoing in terms of Domestic Demand.