Ibec, the group that represents Irish business, said today's CSO growth figures for Quarter 2 of 2017 show that our economy continues to experience strong growth as we enter a period of great uncertainty. Overall, the economy grew by 5.5% in the first half of the year. This was underpinned by strong growth in exports. The group said that some of the figures were worrying however, with weakness evident in consumer spending.
Ibec Head of Tax and Fiscal Policy Gerard Brady said: "Today’s figures are positive overall. They show a domestic economy that appears to be weathering Brexit well, in line with leading indicators such as employment and wages. There were some worrying trends behind the headline figures however. Consumer spending is only up 1.8% in the first half of the year, while business investment in equipment and machinery slowed substantially. It is likely that both were driven by Brexit headwinds and will need to be watched closely over the coming months.
"Consumer spending is now 3% above where it was in the first half of 2008. However, this was noticeably weaker in recent months than the leading indicators such as employment, wages and retail sales would suggest. It is likely that cross-border trade in cars and other goods, accompanied by strong growth in online shopping, has driven this phenomenon. This shows that the exchange rate effect of Brexit is already having an impact. The new CSO measure of domestic demand also shows business has invested almost €20 billion in machinery and equipment over the past 18 months alone, a staggering figure that is a testament to the substance of Ireland's business model. However, this slowed in recent months, with a noticeable drop of 14.3% annually in the first half of the year. This would tie in with anecdotal evidence that businesses are delaying investment decisions as a result of international uncertainty.
“In the context of today’s figures, it is clear that Budget 2018 must produce a real Brexit response and provide guidance for companies to forward plan. Yes, there are still major uncertainties which make it difficult for Government to plan ahead, but issues like mitigation, diversification, innovation and cost competitiveness are still within our control. Government should also avoid any increase in consumer taxes, as it is clear from todays figures that cross-border shopping is already hurting Irish businesses. Companies need a clear signal that domestic policy levers are in place for the worst case scenario in March 2019.”