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Irish economy goes into recession | Irish economy goes into recession |
(about 3 hours later) | |
The Irish Republic's economy has fallen into recession after shrinking for a second quarter in succession. | The Irish Republic's economy has fallen into recession after shrinking for a second quarter in succession. |
The Central Statistics Office (CSO) said gross domestic product (GDP) had contracted by 0.5% in the three months to the end of June. | The Central Statistics Office (CSO) said gross domestic product (GDP) had contracted by 0.5% in the three months to the end of June. |
The economy had shrunk by 0.3% in the first quarter of the year. Technically, a recession is defined as two or more successive quarters of negative growth. | The economy had shrunk by 0.3% in the first quarter of the year. Technically, a recession is defined as two or more successive quarters of negative growth. |
It is the first time Ireland has experienced a recession since 1983. | It is the first time Ireland has experienced a recession since 1983. |
The economy is now facing its most difficult period since high unemployment and emigration hit in the early 1980s. | The economy is now facing its most difficult period since high unemployment and emigration hit in the early 1980s. |
We have acceptance now that the economy is in recession in 2008. The issue is whether it will improve in 2009 Dermot O'Leary, Goodbody Stockbrokers | We have acceptance now that the economy is in recession in 2008. The issue is whether it will improve in 2009 Dermot O'Leary, Goodbody Stockbrokers |
Economists pointed to the collapse of a decade-long bonanza in Ireland's property market, coupled with a slump in construction activity. | Economists pointed to the collapse of a decade-long bonanza in Ireland's property market, coupled with a slump in construction activity. |
The global credit crunch has also been a factor behind the rapid economic slowdown. | The global credit crunch has also been a factor behind the rapid economic slowdown. |
It means Ireland is the first eurozone economy to slip into recession this year. | |
House building issues | House building issues |
Earlier this month, the Economic and Social Research Institute predicted the Irish economy would contract by 0.4% over the year after growing by 6% last year. | Earlier this month, the Economic and Social Research Institute predicted the Irish economy would contract by 0.4% over the year after growing by 6% last year. |
Dermot O'Leary, chief economist at Goodbody Stockbrokers, said: "We have acceptance now that the economy is in recession in 2008. The issue is whether it will improve in 2009. | Dermot O'Leary, chief economist at Goodbody Stockbrokers, said: "We have acceptance now that the economy is in recession in 2008. The issue is whether it will improve in 2009. |
"One thing we know for sure is that investment spending is going to continue to act as a drag on the economy in 2009, particularly on the house building side. | "One thing we know for sure is that investment spending is going to continue to act as a drag on the economy in 2009, particularly on the house building side. |
"We know also that the labour market is deteriorating - so that is going to affect consumption spending. So it does not look like it is going to be a V-shaped recovery." | "We know also that the labour market is deteriorating - so that is going to affect consumption spending. So it does not look like it is going to be a V-shaped recovery." |
Construction slacking | Construction slacking |
The Irish data showed consumer spending in volume terms was 1.4% lower compared with the same period of the previous year. | The Irish data showed consumer spending in volume terms was 1.4% lower compared with the same period of the previous year. |
Capital investment was also 18.8% lower in the quarter compared with 2007, with significant declines in house building as well as in the acquisition of transport equipment and machinery. | Capital investment was also 18.8% lower in the quarter compared with 2007, with significant declines in house building as well as in the acquisition of transport equipment and machinery. |
Industrial output was ahead by 1% on the same quarter in 2007. However, the output of the construction sector fell by 12.2% over the same period. | Industrial output was ahead by 1% on the same quarter in 2007. However, the output of the construction sector fell by 12.2% over the same period. |
A government spokesman said: "As expected, lower levels of new house building had a major restraining influence on growth in the second quarter, as is evident from the very weak investment figures. | A government spokesman said: "As expected, lower levels of new house building had a major restraining influence on growth in the second quarter, as is evident from the very weak investment figures. |
"Other factors at work include higher commodity prices, global financial market problems, weak demand in our major trading partners and adverse exchange rate movements." | "Other factors at work include higher commodity prices, global financial market problems, weak demand in our major trading partners and adverse exchange rate movements." |
The country has enjoyed a boom since the late 1990s, with multinationals arriving to take advantage of one of the lowest corporate tax rates in Europe. | The country has enjoyed a boom since the late 1990s, with multinationals arriving to take advantage of one of the lowest corporate tax rates in Europe. |
Bloxham Stockbrokers chief economist Alan McQuaid said:"Although the domestic side of the economy is contracting at a significant rate, the external side - the multinationals - is holding up quite well, but one would have to question how long that's going to last." | Bloxham Stockbrokers chief economist Alan McQuaid said:"Although the domestic side of the economy is contracting at a significant rate, the external side - the multinationals - is holding up quite well, but one would have to question how long that's going to last." |