Thursday, March 25, 2010

‘Turning the Corner’ – not a chance!

The Irish economy was declared to have ‘turned the corner’ towards the end of 2009 when the CSO released the Q3 quarterly national accounts last December.  At that stage the CSO reported a quarter on quarter change in GDP of +0.3%.  We questioned it at the time.
Today, the CSO have released the quarterly accounts for Q4 2009 and have revised the Q3 figures.  The revised figures show a quarterly change in Q3 of  -0.1%.  GDP actually fell! With the CSO saying that the change in Q4 was a much accelerated fall –2.1% the Irish economy has not contracted for eight quarters in a row and 10 of the last 11.  Remember a recession is defined as two consecutive quarters of negative growth.
Here are the quarterly GDP growth rates for the past 11 quarters.
2007 Q2
2007 Q3
2007 Q4
2008 Q1
2008 Q2
2008 Q3
2008 Q4
2009 Q1
2009 Q2
2009 Q3
2009 Q4
Growth Rate
See Table 4 of the CSO release.
The current drop of –2.3% in Q4 2009 is the second largest in the recession (depression?).
In a statement reacting to the figures the Minister for Finance, Brian Lenihan said:
“Today's figures show that the annual pace of decline in GDP slowed considerably as the year progressed. There was a fall in GDP of 2.3 per cent between the third and fourth quarters. Excluding the impact of the ongoing decline in new house building, GDP was roughly unchanged in the fourth quarter.
Today’s figures are consistent with my Budget Day projections for this year and as I outlined, I expect that the economy will resume growing in the second half of the year. ”
It is pretty easy to check if the Minister’s assertion that if we exclude construction that “GDP was roughly unchanged in the fourth quarter”.  A quick calculation shows that GDP excluding construction declined by –1.8%,  not quiet unchanged.  Here’s a little graph of the two quarterly growth rates: total GDP and GDP excluding construction.
GDP ex con

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