Monday, July 31, 2017

The extra-ordinary volatility in GNP

Here are the quarterly growth rates of GNP from the latest CSO figures.

Quarterly GNP Growth Rates

The largest quarterly growth rate in the series is the 12 per cent recorded in Q4 2016.  And this is followed by the largest quarterly fall – the 7 per cent drop recorded in Q1 2017.  The series have always been volatile but this is on a different scale altogether.

What is going on?  It is hard to know.  MNCs are undoubtedly having an effect and it could be that some of these distortions (intangibles, inversions etc.) are being amplified by the seasonal adjustment applied to quarterly data.  Do they wash out if we look an annual growth rates? Not really.

Annual GNP Growth Rates

There is little that can be learned from these headline figures.  The CSO are working on producing modified measures, such as GNI*, on a quarterly basis which should be provide a better indication of what is going on.

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