Ireland's Reported Emergence From Recession An Optical Illusion
It is being widely reported today that Ireland pulled out of recession in the third quarter, with Irish GDP rising by a greater than expected 0.3% QoQ.
Since being the first more major EU country falling into recession, Ireland has fallen into what most economists could agree is a capital "D" Depression, along with other advanced nations like Spain and Iceland.
That Ireland's GDP was a bit stronger than anticipated in the third quarter may further raise some concerns about the EU's overall performance in the final three months of the year, as it is very possible that Ireland's third quarter "performance" helped overstate the "strength" of the EU "recovery," and extract some payback in Q4.
Related Article (Bolding added for emphasis of key points I made above)
The Irish Times
Ireland technically out of recession
CHARLIE TAYLOR Thursday, December 17, 2009, 13:45
GDP grew slightly during the third quarter but the Central Statistics Office (CSO) has urged caution on calling an end to recession.
The latest Quarterly National Accounts, which were published this morning, indicate that on a seasonally adjusted basis there was a 0.3 per cent increase in Gross Domestic Product (GDP) from July through to September.
On an annual basis, GDP fell by 7.4 per cent in the year to the end of October, compared to a 7.9 per cent decline in the preceding quarter.
Technically, given that the definition of recession is two quarters in a row of falling GDP, this means that Ireland has now exited recession.
However, at a press conference earlier today, assistant director general of the CSO Bill Keating refused to call an end to the recession, pointing out that much of the rise in GDP was attributed to profits from multinationals based in Ireland.
Whether Ireland was out of recession or not was " a matter of semantics", Mr Keating said.
"The general picture shows that on a seasonally adjusted basis there is a levelling off in GDP but GNP continues to decline, albeit at a slower pace than it has in previous quarters. Contributing to the GDP increase in a fairly major way was growth in the multinational sector," he added.
Analysts also warned against declaring the end of what has been one of the worse recessions ever experienced in Ireland.
GDP is the international method of calculating economic decline but in Ireland's case, the Economic and Social Research Institute (ESRI) and other local bodies prefer to focus on GNP (Gross National Product) a measure which strips out multinational profits, much of which usually leave the country.
According to CSO, profits declared here by foreign-owned enterprises increased by €1,054 million during the year ending October 31st 2009.
During the third quarter Gross National Product (GNP) showed a decline of 1.4 per cent on a seasonally adjusted basis. In the year to the end of October 2009, GNP was 11.3 per cent lower.
Since being the first more major EU country falling into recession, Ireland has fallen into what most economists could agree is a capital "D" Depression, along with other advanced nations like Spain and Iceland.
That Ireland's GDP was a bit stronger than anticipated in the third quarter may further raise some concerns about the EU's overall performance in the final three months of the year, as it is very possible that Ireland's third quarter "performance" helped overstate the "strength" of the EU "recovery," and extract some payback in Q4.
Related Article (Bolding added for emphasis of key points I made above)
The Irish Times
Ireland technically out of recession
CHARLIE TAYLOR Thursday, December 17, 2009, 13:45
GDP grew slightly during the third quarter but the Central Statistics Office (CSO) has urged caution on calling an end to recession.
The latest Quarterly National Accounts, which were published this morning, indicate that on a seasonally adjusted basis there was a 0.3 per cent increase in Gross Domestic Product (GDP) from July through to September.
On an annual basis, GDP fell by 7.4 per cent in the year to the end of October, compared to a 7.9 per cent decline in the preceding quarter.
Technically, given that the definition of recession is two quarters in a row of falling GDP, this means that Ireland has now exited recession.
However, at a press conference earlier today, assistant director general of the CSO Bill Keating refused to call an end to the recession, pointing out that much of the rise in GDP was attributed to profits from multinationals based in Ireland.
Whether Ireland was out of recession or not was " a matter of semantics", Mr Keating said.
"The general picture shows that on a seasonally adjusted basis there is a levelling off in GDP but GNP continues to decline, albeit at a slower pace than it has in previous quarters. Contributing to the GDP increase in a fairly major way was growth in the multinational sector," he added.
Analysts also warned against declaring the end of what has been one of the worse recessions ever experienced in Ireland.
GDP is the international method of calculating economic decline but in Ireland's case, the Economic and Social Research Institute (ESRI) and other local bodies prefer to focus on GNP (Gross National Product) a measure which strips out multinational profits, much of which usually leave the country.
According to CSO, profits declared here by foreign-owned enterprises increased by €1,054 million during the year ending October 31st 2009.
During the third quarter Gross National Product (GNP) showed a decline of 1.4 per cent on a seasonally adjusted basis. In the year to the end of October 2009, GNP was 11.3 per cent lower.