The impact of inflation slowed the recovery in real consumer spending earlier in the year, although headline GDP growth continued to accelerate on the strength of multinational companies.
Ireland’s economy grew nearly 11 percent in the first quarter compared to the same period last year on the back of a booming multinational sector and a positive trade outcome, according to National Accounts data released by the Central Statistics Office (CSO) on Friday.
While modified domestic demand — a more accurate reflection of economic activity — also grew 11 percent, it fell 1 percent on a quarterly basis as consumer spending fell along with government spending and investment.
Nominal consumer spending was 6 percent higher compared to pre-pandemic levels, but real consumer spending fell 2 percent when inflation is factored in, showing that higher prices are having a dampening effect on economic activity.
“[The] The data confirms that the Irish economy has rebounded strongly from its lockdown slumps, but that the recovery in real consumer spending has stalled due to record-high inflation in the early months of the year,” said Goodbody chief economist Dermot O’Leary.
“Inflation is already biting and will continue to be a feature in the coming quarters.”
The Treasury conceded that the figures confirmed a weak first quarter for the domestic economy, which faced challenges including the Omicron wave, rising inflation and the disruptions caused by Russia’s invasion of Ukraine.
“While first quarter GDP growth was exceptionally strong, up 10.8 percent qoq, part of this is undoubtedly a ‘washout’ of some one-off factors that led to the unusually negative quarter late last year,” said Finance Minister Paschal Donohoe.
“It’s important to also put these volatile numbers in context.”
KBC chief economist Austin Hughes said the data presented a “confusing picture”.
“This result is in stark contrast to evidence of strong positive economic momentum emanating from other recent indicators such as yesterday’s tax receipts.”
https://www.independent.ie/business/irish/inflation-hits-consumer-spending-in-blow-to-economic-growth-41718848.html Inflation hits consumer spending as a blow to economic growth