When the Q2 QNAs were published back in September they were meet with wide acclaim. The headline figures looked very impressive.
The annual growth rates (percentage change over the same quarter in the previous years) are impressive. GDP in the second quarter of 2014 was 7.7 per cent greater than the equivalent quarter of 2013.
But as was quickly pointed out that while the headline performance might be good “under the hood” things were not all what they seemed to be.
First we can try to decompose the growth into “net exports” and “domestic demand”.
As an aside it is worth noting two things about the above chart though neither is likely to have a substantial impact.
- It doesn’t show the impact for changes in stocks. Net exports or domestic demand could rise but if some of this comes from existing stocks the effect on overall GDP will be lower.
- The CSO would not produce a chart such as the above because the individual series from which the above contributions to overall GDP growth are derived are not additive. The series are chain-linked individually into constant prices.
These aside we can see that the growth in Q2 2014, in annual terms, was pretty evenly divided between net exports and domestic demand.
If we now break net exports into its constituent parts we see that exports shot up hugely in the first have of 2014.
What are we selling more of? On the services side little is evident. Both have increased but not unusually so.
However, if we look at trade in good we see this.
Goods exports in the national accounts have gone vertical! And there has been no offsetting increase in good imports. So what are we making lots more of that we are exporting?
The CSO’s Trade Statistics show merchandise exports from Ireland and they should reflect the massive increase in exports in the QNA and show us what category the additional exports are coming from. But as we now know they don’t. Here is a comparison of quarterly goods exports as reported in the Trade Statistics and as recorded in the National Accounts. For comparison purposes both are in current prices.
The increase in goods exports in the QNA does not appear in the trade statistics. It is due to “contract manufacturing”. Manufacturing that is organised by an Irish resident company but happens somewhere else. However, because the risk is with the Irish-resident company part of the value appears in the Irish national accounts. Yet another MNC effect to muddy the waters.
The conclusion was that there is growth but that perceptible rather than statistical growth is limited to the blue part of the final bar in bar chart above. We will turn to that next.Tweet