Figures today from the Central Statistics Office confirm that the economy is in recession.
The economy, as measured by gross domestic product (GDP), fell by 1.9% in the three months to the end of September, according to the latest figures from the CSO.
Modified Domestic Demand (MDD), which more closely tracks the domestic economy, was broadly unchanged over the same period.
When the third quarter is compared to the same period in 2022, GDP is down 5.8% while MDD is down 0.4%.
When adjusted for seasonal factors, the economy measured by GDP has fallen now for four consecutive quarters since the fourth quarter of 2022.
Today’s figures mean the economy has met the technical definition of a recession in the year to date.
Multi-denominational sectors of the economy shrank by 3.8% in the third quarter with other sectors of the economy declining by 0.7%.
Exports fell by 2.1% while imports were down by 1.7%, the CSO said.
This reflects a downturn in industries dominated by multinationals, like pharmaceuticals. However, the Information and Communications sector, which includes computer services, continued to grow.
Spending by consumers also continued to grow over the three month period.
Growth in the domestic economy has softened in recent months following a sharp bounceback from the Covid-19 pandemic that resulted in MDD growth of 9.5% in 2022, faster than GDP growth in any other euro zone economy.
Unemployment has risen to 4.8% from a near record low of 4.1% in February, with retail sales posting their first annual decline of the year last month and surveys showing growth in the services sector slowing for sixth months in a row. But a sharp slowdown in inflation to 2.3% last month should offer some respite.
Before today’s figures, the Department of Finance predicted that MDD will grow by 2.2% this year and again in 2024.
Commenting on today’s CSO figures, the Minister for Finance Michael McGrath said the decline in GDP reflects the ongoing fall-off in demand for Covid-related pharmaceutical products.
“We are also seeing a marked softening in global economic conditions, with the OECD this week projecting weak growth for next year – if realised, this would be the lowest rate of global growth since the Global Financial Crisis with the exception of the first year of the pandemic,” Mr McGrath said.
But he noted that it was not all bad news on the external front, with services exports recording solid growth and reaching a new record level.
He said that Modified Domestic Demand – his preferred metric – was unchanged in the third quarter, with growth in consumer spending and a fall in investment spending largely off-setting each other.
“Encouragingly, personal consumer spending increased by 0.7% in the third quarter, broadly in line with pre-pandemic norms and up 2½ per cent on an annual basis,” the Minister said.
“Continued growth in consumer spending is supported by strong employment growth – figures published last week showed that employment increased by 27,000 in the third quarter – and by the easing of inflation, which has slowed to 2.3% in November, its slowest rate of increase since July 2021,” he said.
Michael McGrath said he was cognisant that many households continue to be impacted by price pressures, but added that measures introduced in Budget 2024 will help to support households that continue to be impacted by cost-of-living pressures.
He also said he expected to see continued momentum in housing supply in the months ahead, with just under 31,000 new units commenced in the 12 months to October.