Category Archives: GNP

12/12/15: Irish National Accounts 3Q: Post 6: Measuring Recovery


In previous posts, I have covered:

  1. Irish National Accounts 3Q: Sectoral Growth results 
  2. Year-on-year growth rates in GDP and GNP in 3Q 2015 
  3. Quarterly growth rates in GDP and GNP 
  4. Domestic Demand and
  5. External trade side of the National Accounts 

Now, as usual, let’s take a look at the evolution of 3 per-capita metrics and trace out the dynamics of the crisis.

In 3Q 2015, Personal Expenditure per capita for the last four quarters totalled EUR 19,343, which represents an increase of 2.78% on four quarters total through 3Q 2014. Relative to peak 4 quarters total (attained in 4Q 2007), current levels of Personal Expenditure on Goods & Services on a per capita is 7.14% below the peak levels. In other words, 7 and 3/4 of the years down, Personal Expenditure on a per capita basis is yet to recover (in real terms) pre-crisis peak.

Per capita Final Domestic Demand (combining Personal Expenditure, Government Expenditure and Fixed Capital Formation) based on the total for four quarters through 3Q 2015 stood at EUR 34,616, which represents an increase of 7.75% y/y. This level of per capita Demand is 11.19% lower than pre-crisis peak attained in 4Q 2007. As with Personal Expenditure per capita, Final Demand per capita is yet to complete crisis period recovery, 7 and 3/4 of the years down.

On the other hand, GDP per capita stood at EUR 42,870 on a cumulative 4 quarters basis, which is 6.2% above the same period for 2014 and is 0.98% above the pre-crisis peak (4Q 2007). Hence, GDP per capita has now fully recovered from the pre-crisis peak and it ‘only’ took it 7.5 years to do so.

GNP per capita has recovered from the crisis back in 2Q 2015, so at of Q3 2015, 4-quarters aggregate GNP per capita stood at EUR 36,508 which is 5.85% ahead of the same period through Q3 2014 and is 2.39% above pre-crisis peak. In other words, it took 7 and 1/4 years for GNP per capita to regain its pre-crisis peak.



It is also worth looking at the potential levels of output per capita ex-crisis.

To do so, let’s take average growth rates for 4 quarters moving aggregate GDP. GNP and Domestic Demand, for the period 1Q 2002 through 4Q 2007. Note 1: this period represents slower rates of growth than years prior to 1Q 2002. Note 2: I further removed all growth rates observations within the period that were above 5 percentage points for GDP and GNP and above 4% for Final Demand, thus significantly reducing impact of a number of very high growth observations on resulting trend.

Here is the chart, also showing by how much (% terms) would GDP, GNP and Domestic Demand per capita have been were pre-crisis trends (moderated by my estimation) to persist from 4Q 2007:


I’ll let everyone draw their own conclusions as to the recovery attained.

11/12/15: Irish National Accounts 3Q: Post 4: Domestic Demand


In the previous posts of the series, I covered Irish National Accounts 3Q: Sectoral Growth results;  year-on-year growth rates in GDP and GNP; and quarterly growth rates in GDP and GNP.

Now, let’s look at the Domestic Demand.

Personal Expenditure on Goods & Services rose 3.63% y/y in 3Q 2015 in real terms, posting a stronger growth than in 2Q 2015 (+2.91%) and in 3Q 2014 (+1.11%). Over the last four consecutive quarters, growth in Personal Expenditure on Goods & Services averaged 3.36%. All of this is strong and encouraging, as Personal Expenditure on Goods & Services is one of the few figures still remaining in the National Accounts that are unpolluted by the MNCs activities and as such is a significant reflection of the strength of the real economy.

Despite the rise in 3Q 2015, current level of Personal Expenditure on Goods & Services remains 7.85% below pre-crisis peak levels.

Still, in 3Q 2015, Personal Expenditure on Goods & Services contributed EUR779 million to y/y growth in GDP and GNP, which is up on EUR616 million growth contribution in 2Q 2015 and on EUR236 million growth in 3Q 2014.


Expenditure by Government on Current Goods & Services fell in 3Q 2015 (down -1.38% y/y or -EUR94 million). This compares to growth of 1.82% y/y in 2Q 2015 and 3.23% growth in 3Q 2014. Over the last four quarters, Expenditure by Government on Current Goods & Services growth averaged strong 3.95% - faster than growth in Persona Consumption.

As with Personal Consumption, Government Expenditure is still down on pre-crisis peak levels, in fact, it is down more than Personal Consumption at -13.1%.


Gross Domestic Fixed Capital Formation continued to post literally unbelievable readings in 3Q 2015, rising 35.8% y/y, compared to 34.2% increase recorded in 2Q 2015 and to 10.1% rise in 3Q 2014. 3Q 2015 y/y growth figure was the highest on record and there is a clear pattern of dramatic increases over 4Q 2014, 2Q 2015 and 3Q 2015, with last four quarters average growth rate at 24.9% implying that Irish economy’s capital stock should be doubling in size every 3 years. This is plain bonkers and is a clear signifier of distortions induced into the Irish economy by the likes of Nama, vulture funds and MNCs.

Based on our official accounts, whilst building and construction (including civil engineering etc) added only EUR44 million to GDP in 3Q 2015, Fixed Capital Formation jumped by EUR3.1 billion over the same period of time.

Still, even with this patently questionable accounting, Irish Gross Domestic Fixed Capital Formation remains 11.8% below pre-crisis peak levels.



With all three components of Final Domestic Demand still under pre-crisis peak levels performance, Final Domestic Demand ended 3Q 2015 some 7.0% below pre-crisis peak. However, Final Domestic Demand did post strong growth, rising 10.2% in 3Q 2015 compared to 3Q 2014, with rate of growth in 3Q basically consistent with 10.1% expansion recorded in 2Q 2015, and up strongly on 3.1% y/y growth recorded in 3Q 2014. Over the last four quarters, Final Domestic Demand growth rate averaged 8.35%.




However, virtually all of growth in Final Domestic Demand was accounted for by Fixed Capital Formation - the only component of the Domestic Demand that is impacted by the MNCs. In 3Q 2015, growth in Final Domestic Demand stood at EUR3.782 billion, of which EUR3.098 billion came from Fixed Capital Formation side.

One additional point is worth making with respect to the expenditure side of Irish National Accounts in 3Q 2015. In last quarter, EUR497 million (or 37.6% of total GNP growth y/y) came from the expansion in the Value of Physical Changes in Stocks. This is not insignificant. In 3Q 2015, compared to 3Q 2014, Personal Expenditure in Ireland contributed EUR779 million, while Changes in the Value of Stocks contributed EUR497 million. Absent this level of growth in stocks, Irish GNP would have been up only 3.43% y/y instead of 5.5% and taking into the account last four quarters average changes in Stocks, the GNP would have been up just 2.8%. In other words, quite a bit of Irish GDP and GNP growth in 3Q 2015 was down to companies accumulating Physical Stocks of goods and services, sitting unsold.

A key observation, therefore, from the entire National Accounts series is that one cannot talk about Irish economy ‘overheating’ or ‘running at its potential output’ anymore: all three headline growth figures of GDP growth (+6.84% y/y in 3Q 2015), GNP growth (+5.50% y/y) and Domestic Demand growth (+10.23% y/y) are influenced significantly by MNCs and post-crisis financial and property markets re-pricing. In the surreal world of Irish economics, the thermometer that could have told us about economy’s health is simply badly broken.


Stay tuned for analysis of Irish External Trade figures next.

10/12/15: Irish National Accounts 3Q: Post 3: Quarterly GDP and GNP Growth


In the first post of the series, I covered Irish National Accounts 3Q: Sectoral Growth results (http://trueeconomics.blogspot.ie/2015/12/101215-irish-national-accounts-3q-part.html).

The second post covered year-on-year growth rates in GDP and GNP (http://trueeconomics.blogspot.ie/2015/12/101215-irish-national-accounts-3q-post.html)

Now, consider quarterly growth rates analysis.

While things were bustlingly rosy for GDP and GNP based on year-on-year growth figures, the picture is much more mixed when it comes to quarterly growth rates.

Firstly, GDP at constant factor costs rose 1.43% q/q in 3Q 2015, down from 2.4% growth recorded in 2Q 2015 and on 2.54% growth recorded in 3Q 2014. In so far as this reflects sectoral activity, this slower 3Q 2015 growth is hard to interpret.

Taxes at constant factor costs actually fell 1.49% q/q in 3Q 2015, having risen just 0.37% q/q in 2Q 2015. 2014 3Q contraction was much sharper at 6.65%.

GDP at constant market prices rose 1.37% q/q in 3Q 2015, once again posting slower rates of growth than in 2Q 2015 (+1.89%) and in 3Q 2014 (+2.06%). The current rate of q/q growth in GDP was the slowest in 3 quarters, but remains significant (above 1.33% average for the period of 1Q 2013 - 3Q 2015.

GNP surprised to a downside, falling 0.81% q/q in 3Q 2015, having previously posted growth of 1.35% in 2Q 2015 and having expanded 2.71% in 3Q 2014. In fact, 3Q 2015 is the worst quarter-on-quarter growth result for GNP since 4Q 2013 and the second quarter of negative growth over the last 4 quarters (previous one was in 1Q 2015 at -0.24%).

Over the first three quarters of 2015, GNP growth averaged 0.1%, which compares poorly to 1.97% average for the first three quarters of 2014 and 3.21% average growth posted for the first 3 quarters of 2013, and ditto for 2012.


The key takeaways here are:

  1. Q/Q GDP growth remains robust, but is now the lowest in 3 consecutive quarters;
  2. Q/Q GNP growth has turned negative once again in 3Q 2015, posting the worst reading for any quarter since 4Q 2013.
  3. Meanwhile, net factor income outflows to the rest of the world are booming, hitting (on seasonally adjusted basis) the highest level since 4Q 2011 and the second highest level on record. 

In other words, MNCs extraction of profits from the economy is ramping out, which is helping the Exchequer and pushes up GDP, but also is leading to GNP growth lagging that of GDP.


Stay tuned for more analysis coming up.