A good friend of mine took one look at the CSO’s National Quarterly Accounts released today and described it in two words: ‘f****** awful’. As this is a family-friendly blog I’ll just content myself with ‘bloody disaster’.
Ireland’s recession is continuing and even accelerating. GDP has fallen for three quarters – with the first quarter of this year registering a fall of 0.6 percent. Since the summer of last year the economy has fallen by 1.8 percent. Let’s put that in perspective. This is the biggest fall over three quarters since 2009 when the economy went ballistic.
Let’s survey the main points:
- Consumer spending has fallen through the floor – falling 3 percent in one quarter. This is the biggest quarterly fall in the recession.
- Investment is continuing to fall – over 7 percent.
- Exports fell by over 3 percent. They have fallen in three out of the last four quarters. So much for the export-led recovery.
We are in now in the middle of a perfect storm – falling exports (due to irrational austerity being pursued at EU level) and fall domestic demand – due to our home-grown irrationality.
Let’s knock this GNP-thingy on the head. No doubt, supporters of austerity and government policy will try to claim that the 2.9 percent increase as somehow ‘more reflective of the domestic economy.’ This is not true.
GNP is arrived at by subtracting outflows from the economy such as profit repatriation. In the last quarter of 2012, €7.1 billion flowed out of the country (net). In the first quarter of this year, €5.9 billion flowed out. If the flows were constant, GNP would have also fallen. GNP can be influence by a number of factors that have little to do with the health of the domestic economy – in particular, the timing of profit repatriation.
Try this little comparison:
- GNP rose by €953 million after outflows from the economy are taken into account.
- Consumer spending and investment fell by €931 million
Which do you think is a better reflection of our domestic economy?
None of this should be a surprise. A number of indicators had been pointing to a continuing downturn (e.g. Retail Sales Index). And with the Government cutting its own investment budget, hitting consumers with regressive tax increases such as the abolition of the PRSI allowance, with cuts in Child Benefit and other social protection programmes, with wages falling after inflation, with more people falling into arrears – how anyone could think this is the basis for recovery is beyond me.
(And when the property tax bills are paid, wait for another hit to consumer spending. And don’t forget the water charges. Keep the good times rolling).
The economy actually returned to recession in the latter half of 2012. But how many people realised this? Government ministers either ignored this inconvenient fact or denied it. The media, with some exceptions, didn’t do much to cover it either, meaning that Ministers weren’t challenged when they went on with the ‘return to growth’ mantra. Many of us were sleep-walking as the economy was double-dipping.
Well,we had better wake up. We are fully back in recession.