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Investment spurs Irish domestic economy in second quarter

·2-min read

By Padraic Halpin

DUBLIN (Reuters) -Ireland's domestic economy grew by 4.3% quarter-on-quarter from April to June, data showed on Friday, mainly driven by a pick up in investment in items such as plant and machinery as consumers also began to spend again on services.

Modified domestic demand (MDD), which strips out some of the ways Ireland's large multinational sector distorts measuring economic activity, was 10.6% higher than in the same period in 2021 when the economy was emerging from a strict lockdown.

MDD had fallen by 0.1% quarter-on-quarter in the first three months of the year.

Gross domestic product (GDP), a broader measure of economic activity, grew by 1.8% on the quarter and was 11.1% higher year-on-year. The government has long cautioned against using this measure as it is routinely inflated by multinational activity.

The domestic economy expanded by 5.8% in 2021. In April the finance ministry cut its forecast for growth this year to 4.2% from the 6.5% it had expected late last year before inflation began to rise sharply.

Finance minister Paschal Donohoe said that while the jump in private sector investment was particularly heartening, momentum in the economy has eased and that the outlook for the coming months had "weakened considerably."

Friday's data - which came on the back of unemployment falling to a two-decade low of 4.3% and tax receipts rising to a fresh record level - also showed that exports grew by 3% in the quarter, with construction up 2.7%.

While retail sales have fallen for three straight months to July, Friday's Central Statistics Office (CSO) data suggested this was partly due to consumers spending more on services after all COVID-19 restrictions were lifted early in the year.

Growth in services expenditure of 3.3% pushed personal spending on both goods and services up 1.8% quarter-on-quarter.

However higher prices are pulling down the real effects of consumption, the CSO said, noting that while consumers spent 12.4% more on goods and services year-on-year, they only got 5.6% more in terms of volume of goods and services.

Inflation hit a near 40-year high of 9.1% in Ireland last month.

(Reporting by Padraic HalpinEditing by Tomasz Janowski, William Maclean)