Surge in housebuilding boosts growth

A surge in housebuilding has boosted economic growth in the second quarter of the year, according to new figures from the Central Statistics Office.

They show Gross National Product in the April to June period running 4.2 per cent ahead of the same period in 2003, down from a 5.2 per cent annual rate in the first quarter but still a healthy rate of expansion. The figures show that most areas of the economy are contributing to economic growth. However, the highlight of the figures is a 20 per cent rise in housebuilding compared to the same period in 2003.

This helped to boost investment levels - up 14 per cent in the second quarter - and contributed significantly to the strong growth rate.

Housebuilding and home improvements contributed about one-third of the growth rate in the second quarter, according to an analysis of the figures by Mr Austin Hughes of IIB. This means GNP growth in the remainder of the economy was around 3 per cent.

"The second-quarter data suggest that at present the Irish economy is currently two-speed in nature, characterised by a booming property market and a more sedate pace of growth elsewhere," he said.

The CSO quarterly figures suggest a more marked slowdown in the second quarter. They show a 0.5 per cent quarterly rate of growth, against 1.6 per cent in the first quarter.

However, the CSO cautions that the seasonal adjustments needed to come up with the quarterly figures still needed to be treated with caution and that the overall picture is that the economy is "growing steadily".

The breakdown of the figures suggests that consumer spending slowed down, showing no change on its level in the first quarter. Compared to last year, spending was running 2.2 per cent ahead in the second quarter.

Exports, meanwhile, were up 6.6 per cent and imports were running 6.1 per cent ahead, meaning exports contributed in net terms to growth.

As well as the surge in housebuilding, the investment figures were boosted by new airplane purchases - probably mainly accounted for by Ryanair's fleet expansion. The Central Statistics Office estimates that these account for the 11 per cent annual rise in total machinery and equipment investment in the second quarter. The CSO believes if they are excluded, investment in this category would be slightly down.

This suggests that industry is recovering only gradually, a point reflected in industrial production figures, which have only picked up sharply in July, subsequent to the period covered by the second-quarter growth figures. Service output is growing at a more rapid 3.7 per cent, reflecting buoyancy in this area, also demonstrated by recent employment figures.

Most analysts are leaving their forecasts for 2004 unchanged, with estimates that GNP should grow at between 4.5 and 5 per cent, or perhaps slightly more if export growth accelerates.