Don’t Mind What’s Going On – Feel The Spin

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You’d think there would be concern among commentators about the latest GDP numbers produced by the CSO.  After all, a quarterly growth of 0.1 percent is not that far from negative growth.  Or that consumer spending has fallen in the last two quarters (an interesting contrast to all those feel good anecdotes about increased consumer confidence).  Or that the explosion in export growth doesn’t quite tally with global trends or even other numbers produced by the CSO.

But there’s a class of commentators who are determined to cheerlead regardless. Michael Hennigan gives a flavour of these – with economists talking up the ‘fastest growing economy’ in the EU.  Sure, why not.

Fortunately, we have more robust analysis produced by Constantin Gurdgiev who deconstructs the national account numbers – in particular, highlighting the inflated export figures (something I referred to here).  In addition, Seamus Coffey points out that short-cutting the hard work of analysing these numbers by merely focusing on GNP is no longer an option; for the GNP, too, is inflated by multi-national activity that doesn’t take place in this state (I know, it sounds weird – welcome to Irish national accounts).

I just want to produce one graph that shows the stagnating state we are still immersed in – a graph that Michael Burke tweeted earlier this morning.

QNA 2014 3rd 1

There’s been some up and there’s been some downs but when we take a long-look we can see that domestic demand – the combination of personal consumption, investment  and public service expenditure which best captures activity in the domestic economy – remains much the same as it was in late 2009 and early 2010.  Five years bouncing along the bottom is a long time coming after a crash in the property market.

And just as we have to be cautious about export numbers inflated by multi-national activities that don’t take place in Ireland – we might have to be careful about investment numbers, especially as the new national accounts classification now includes R&D activity.  This activity may not have much impact on the domestic economy but it will show up as domestic expenditure nonetheless.

And taking a look at the biggest item in domestic demand – consumer spending – we find the following.

QNA 2014 3rd 2

If anything, the stagnation is even worse, falling from late 2009 and effectively flat-lining over the last year.  You won’t hear much about that from the cheer-leading brigade.

So what does all this mean?  We are still stuck in the grip of stagnation.  The boost in previous headline numbers has levelled out.  Is there growth in certain parts of the economy?  Of course.  Is it broad-based?  No.  Are the Government policies working? Well, for the top 10 percent, they appear to be working a charm.  For most, it’s getting a bit harder on the farm.

But if you find this all a bit depressing or negative – forget everything you read here.  Just pull the covers over your head.  You’ll have plenty of commentators who will lullaby you to sleep.

‘All is well . . . all is well . . . all is well . . . ‘

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