GDP grows at fastest rate since Q1 2023 in Q3

GDP reading: The economy grew at the fastest speed since Q1 2023 in the third quarter, according to a second release by the statistical office. It revised up seasonally adjusted quarter-on-quarter GDP growth to 3.5% from 2.0%, rebounding from a 0.3% contraction in the prior quarter. On an annual basis, GDP rose 2.9% in Q3, compared to the previous quarter's 3.2% fall and marking the best result since Q4 2022.

Drivers: The acceleration in quarter-on-quarter growth was driven by a surge in fixed investment, which tends to be jumpy due to the heavy presence in Ireland of multinational firms, whose balance-sheet movements of intellectual property crop up in GDP statistics: Fixed investment surged by 211.9% in Q3, following the 63.0% contraction logged in the prior quarter. Developments in other GDP components were more mundane, with businesses and consumers still bearing the scars from past rises in inflation and interest rates: Household spending slipped by 0.2%, broadly wiping out the 0.3% growth seen in Q2. In addition, government spending growth dipped to 1.5% from 1.9%. Finally, net exports shrank, with exports contracting 7.0% (Q2: +12.0% qoq s.a.) and imports expanding 2.1% (Q2: +5.0% qoq s.a.).

GDP outlook: Our panelists project GDP to grow again quarter on quarter in Q4. That said, the pace of expansion is seen slowing from Q3 and will likely not be enough to undo the damage done by a weak start to the year, with our Consensus for the economy to shrink for the second year running over 2024 as a whole. In 2025, GDP should return to growth—but only weakly, posting the fourth-worst result in the past decade. Modified domestic demand, a measure that strips out distortions from multinational activity, is expected to rise at the weakest pace since the early 2010s—excluding 2020, the onset of the Covid-19 pandemic.

Panelist insight: EIU analysts said: “We forecast that real GDP will grow by 3.4% in 2025, following a contraction of 1.2% in 2024. The main drivers will be multinational sector activity, a pick-up in investment and external demand for exports. This degree of expansion, combined with unemployment at a historical low and an inflation rate still around 4% in the services sector, suggests that there might be a risk of overheating.”

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