Stag-covery (n): a situation where statistical recovery occurs within a persistent economic stagnation
The CSO’s new release shows a statistical recovery and a stagnant economy – a state of affairs that can be described as stag-covery.
The headline rates show a GDP quarterly increase of 2.7 percent. This might seem solid enough but all this is driven by net exports. The domestic economy remains mired in stagnation.
The worst of the economic crash ended in 2010. Since then it’s just a matter of bouncing along the bottom. In 2013 consumer spending fell, spending on public services bumped up marginally while investment fell marginally. We can debate the swings and roundabouts (impact of the pharma cliff, aircraft leasing, etc.). But the narrative remains the same – the ship sunk to the bottom and is struggling to get back to the surface.
The first quarter of 2014 didn’t get off to a hectic start. On a quarterly basis:
- Consumer spending fell, though this shouldn’t be too surprising given that it was coming off a quarter that contained Christmas spending.
- Spending on public service resumed its long-term fall – by over 2 percent.
- Investment fell by a substantial 8 percent.
It is this inability of the latter to generate any momentum upwards that is particularly worrying.
This represents is a potential problem for the Government. In the last quarter investment fell by 8 percent. Yet the Government has pencilled in investment growth of over 15 percent this year. Of course, the game isn’t even half over but this is an especially poor start.