Economy expands by 26.3%

Or at least that is what the national accounts tell us.  The CSO have published the National Income and Expenditure Accounts for 2015.  These show that real GDP expanded by 26.3 per cent in 2015 and real GNP grew by 18.7 per cent.  Do these numbers mean anything?  It is hard to know.

Looking at the expenditure approach the big real changes were in investment (+26.7%), exports (+34.4%) and imports (+21.7%).

In nominal terms, exports in 2015 were put at €317.2 billion, up from €219.8 billion in 2014. Exports minus imports was €81.2 billion compared to €34.6 billion in 2014.  We would usually expect most of this to feed through to the outflow of factor payments but net factor income from abroad only went from –€29.7 billion in 2014 to –€53.2 billion in 2015.  That means most of the improvement in net exports also contributed to GNP but the “gross” part of this seems to be important.

The reason is that there seems to be an awful lot happening on the asset side of the national accounts.  The nominal provision for depreciation rose from €30.9 billion in 2014 to €61.6 billion in 2015.  It looks like a large part of the increase in gross value added in 2015 of €60 billion went to cover the depreciation of assets.

The biggest source of the additional value added was in the Industry sector which rose 97.8 per cent in real terms over in the year (and in nominal terms rose €50 billion).  The CSO don’t provide a sectoral breakdown for this (they usually do) but it is probably a safe guess that a large part of it is related to the chemical and pharmaceutical sector.

One explanation is that a number of sectors saw MNCs move intangible assets onshore.  This increases gross value added in Ireland as there are no longer outbound royalty payments.  There is also a once-off increase in investment when the asset moves here (but the growth effect of this is offset by the import of the asset).

It is also worth noting that the increase in value added isn’t necessarily related to goods manufactured in Ireland.  The CSO’s External Trade data, which only include goods that physically leave Ireland, shows €111 billion of goods exports from Ireland in 2015.  Goods exports in the national accounts are done on a different basis (where ownership rather than location matters) and show exports of €195 billion.  A large part of the value added from these exports is accounted for in Ireland.

So we have a large increase in gross value added but this doesn’t fully feed through to increases in wages and/or profits.  Non-agricultural wages and salaries rose from €67.7 billion in 2014 to €71.5 billion in 2015.

The domestic trading profits of companies rose from €52.3 billion in 2014 to €74.4 billion in 2015.  This €22 billion increase roughly corresponds the increased outflow of net factor income.  Profits before depreciation would be up by even more but a lot of that went against the fall in the value of the assets.

But even then the value on onshored assets can’t account for all of this.  Most of the increase in investment can be attributed to research and development which in nominal terms rose from €9.6 billion in 2014 to €21.3 billion in 2015.  It is likely that most of this increase is due to once-off purchases of intangible assets rather than ongoing expenditure on R&D.

There may also be impacts from the aircraft leasing sector.  Although the investment figures show a small decrease in investment in transport equipment in 2015, a balance-sheet effect may have resulted in increased aircraft assets being accounted for in Ireland.  Gross value added in aircraft leasing may be high but depreciation of the asset would again consume a lot of this.

The CSO highlighted this and slide 6 of their presentation on the figures shows that Ireland’s gross capital stock rose by about €300 billion in 2015, from €750 billion to €1,050 billion.  Even with today’s inflated figures this corresponds to an increase in the gross capital stock equivalent to 120 per cent of GDP in just one year. Investment in 2015 was equivalent to just over 20 per cent of GDP so these balance-sheet effects impacted the capital stock to the tune of almost 100 per cent of GDP.

The best we can do to strip out all of this madness is probably to look at net national income which excludes the provision for depreciation from all assets and accounts for net factor income from abroad.

Net National Income at Market Prices grew by 6.5 per cent in 2015 which is probably somewhere around where “the Irish economy” grew at in 2015 rather than the 26.3 per cent that “the economy in Ireland” grew by.

Comments

comments

69 thoughts on “Economy expands by 26.3%”

  1. Whole thing is nuts. Absolutely nuts. We’re maybe not a tax haven but by jimminy try explaining that to those that matter.
    Beyond farcical.

    1. Not much! JtO still fighting the good fight. The Failed Staters enraged by good news. The boys adding actual facts and reason. Rest of media still ignoring that part and getting on with ill-informed whingeing ( and Kate Middleton is back in THAT dress!!!) It’s like 2008 all over again! Oh and no, Enda Kenny is not resigning (again. They’re at that since 2002). You can go back to sleep now 🙂

  2. This is wonderful news, and on the Twelfth holiday to boot. Its the economic equivalent of Brazil 0 – Germany 7. The government needs to broadcast these figures all over the world.

    It looks like I got it badly wrong when I forecast 8%-10% economic growth for 2015 in one of my posts last summer. I can only but apologise for the gross inaccuracy of my forecast and for misleading people who read it.

    There is no reason whatever to doubt the accuracy of the CSO figures. They are extremely professional and have the best statisticians in Ireland. Those who say they are inaccurate need to produce evidence that they are inaccurate. If the figures are volatile, its because the real world is volatile. Ireland is especially prone to this volatility because (a) its very export-oriented (b) a very large chunk of its export/import trade is with countries that use a different currency to its own, so exchange-rate movements can have a dramatic effect. The job of the CSO is to measure the real world and, if the real world is volatile, that’s not the CSO’s fault..

    Attacks on the CSO by some twitterers and commentators this morning (not the author of this thread) are simply sour grapes. It is only in Ireland that people say ‘shoot the messenger’ when the messenger brings good news. In other countries that fate is reserved for when the messenger brings bad news. Of course, if anyone was foolish enough to predict in 2010 that the Irish economy was toast for a generation, their anger at this morning’s figures would be understandable.

    However, the figures do contain a large ‘one-off” windfall element due to the 2013-2015 fall in the value of the euro v sterling and the dollar, which was of the order of 12%-15%. This added to profits and value-added on a disproportionate scale. For example, if a company in Ireland exports goods to the UK and USA to the tune of 100 million euro and has fixed costs in Ireland of 80 million euro, its value-added is 20 million euro. If the euro falls 15% v sterling and the dollar, these figures become 115 million euro, 80 million euro and 35 million euro. So, the value-added has almost doubled.

    Since Brexit the 2013-2015 devaluation has been reversed and the euro has risen about 15% v sterling, although its value v the dollar hasn’t changed much. So, the windfall element present in the GDP figures in 2014 and 2015 will be partially reversed in 2016 and beyond. This should result in much lower GDP growth in 2016 and beyond, maybe even negative growth in GDP (not a prediction of such, just that its a possibility), but from a much higher base.

    But, crucially, GNP won’t be affected nearly as much. Very encouraging that in Q1 2016, although annual GDP growth fell to 2.6% (in line with the previous paragraph), annual real GNP growth remained a healthy 10% despite the appreciation of the euro v sterling. Personal consumption will be affected even less. Its now running at 5% annual real growth and seems to be accelerating (2.3% real growth in the last quarter alone).

    One way to corroborate the GNP growth figures in to look at tax receipts. Between Jan-Jun 2013 and Jan-Jun 2016, total tax receipts in Ireland rose by 28%, despite zero inflation and virtually no new taxes (indeed tax cuts in the second half of that period). This is very close to the growth in nominal GNP of just over 30% in the same period. The average for the EU in the same period was 4%-5%.

    So, putting all the bits together, I’d say the following is an accurate summary of the situation:

    (a) Its now indisputable that Celtic Tiger 2 began in the second half of 2013 – since then the underlying real growth rate has been around 8% .

    (b) In 2015 there was an additional ‘one-off’ windfall element of around 10% of GDP resulting from the 12%-15% fall in the value of the euro v sterling and the dollar – this will be partially reversed in coming years.

    (c) This growth has resulted in both the budget deficit and unemployment falling at a much faster rate than anybody predicted in 2013 – the budget deficit should be gone this year and full employment (5% or less) should be hit next year.

    (d) Additionally, the growth has led to a huge balance-of-payments surplus – this puts Ireland in a very strong position to cope with any Brexit-induced slowdown in the UK. The growth now needs to be widened out to include a construction boom (no matter how much some from the 2000-2007 school of economists complain about it), which in turn should lead to a resumption of net immigration from 2016 on.

  3. Thank you, Seamus, for trying to make some sense of these data. Given the volatility of these data, it beggars belief how the MoF, the mandarins in the DoF, IFAC, DG EcFin and the macromedia commentariat can continue to perform their usual antics with a straight face. The macroeconomy is a plaything of MNCs and High Net Worth Individuals. And the microeconomy is a plaything of powerful, entrenched special interests.

    Despite a less than efficient application of the limited resources of the tax and welfare system – and some redistribution of the huge economic rents being captured, the gap between AIC and GNI per capita remains large (GDP per capita is totally irrelevant in this context).

    But once there is now egregious widening of this gap – as happened with water charges – the politicos should be able to keep the show on the road.

  4. It is time that the CSO started publicising a number that had some economic or even real-world meaning.

    The slides on their website (if you can find them) actually talk about the quarterly fluctuations in some of these numbers!

    1. They have to deal with the standards they have in terms of national accounts. I recall in 1988 sitting on a Eurostat giant working party on multinational financial flows and it’s impact on the balance of payments nd inter alia national accounts. These things take time….lots and lots of time.
      The last para of the post contains an answer to the what’s a meaningful number issue

  5. You guys need to chill out a bit. We just took the JtO-Seafoid collar forecast algo bot into a dark corner of the underground car park and did a bit of batting practice. Its a momentum switch now into the JtO-Seafoid straddle.

    1. I can’t imagine straddling JTO. I always visualise him in a Tyrone jersey singing “I believe I can fly”.

  6. Does this mean our National Debt is below 80% of GDP and the European average?

    What effect does this have on the spending caps that have been placed on Ireland by the EU (the sixpack etc.)?

  7. The CSO are just calculating GDP as per the standard international methodology and it is ridiculous if anyone suggests otherwise. It is also useful for Ireland’s debt ratio that GDP has been revised up massively , as the ratio in 2015 is now 78.7% instead of the previous figure of 93.8%..That said the data does raise some issues.

    One relate to prices deflators. Many multinationals appear to price in US dollar, so a stronger greenback translates into higher euro prices. Export prices rose by over 7% last year, for example, which begs the question as to how ‘real’ that was given the deflationary environment. Similarly , assets valued in dollars are counted in euros.

    The sheer scale of these multinational flows relative to the economy are also now problematical. The CSO informs us that ‘corporate restructuring both through imports of individual assets and also reclassifications of entire balance sheets in 2015 means that the level of capital assets in Ireland increased dramatically compared to 2014’ and then ‘ As a consequence of the overall scale of these additions, elements of the results that would previously (have) been published are now suppressed to protect the confidentiality of the contributing companies’. implying that just a few companies or indeed even one accounted for a huge swing in Ireland’s recorded GDP

    A related issue is that we have no idea what determines these ‘balance sheet’ reclassifications and as such any given year could see massive swings in the other direction, with GDP falling by 20% or so.

    Finally, it now transpires that Ireland’s net international investment deficit is now put at over €500bn instead of the previously reported €150bn.

  8. Never in the history of economics has a set of growth figures produced such an angry reaction. Fury doesn’t begin to describe it. In any other country Michael Noonan would now be paraded around town in an open-top bus like the Welsh football team. Instead, he gets vilified. And social media is full of angry mobs, most of whom would struggle to add 2 and 2, all claiming to be able to estimate economic growth better than the CSO.

    I’ve already said in my first post that the 2015 figures contain a large ‘one-off’ windfall element (due to the fall in the value of the euro v £sterling and the $dollar) which exaggerates growth in that year (but only that year). This factor was already unwinding in Q1 2016 (due to the fall in the £sterling v the euro). Hence the GDP growth figure of 2.6% in that quarter under-estimates real economic growth, partly compensating for the over-estimate in 2015. The best way to look at the figures and smooth out the fluctuations is to look at growth since Celtic Tiger 2 began – i.e. over the period 2013 Q1 to 2016 Q1

    According to today’s CSO figures:

    between Q1 2013 and Q1 2016 real GDP grew by 39.7%

    between Q1 2013 and Q1 2016 real GNP grew by 38.5%

    That’s average annual growth over the 3-year period of around 10%-11%, roughly similar to peak Celtic Tiger 1 in the mid 90s. If we look at the figures for growth over the same period for lots of different sectors, the CSO estimates look perfectly plausible. I have compiled a list as follows:

    [ 1] total tax receipts:

    Jan-Jun 2013; 17,599 million euros
    Jan-Jun 2016: 22,623 million euros

    increase of: +28.5%

    of which:

    [ 2] income tax:

    Jan-Jun 2013: 7,292.0
    Jan-Jun 2016: 8,771.0

    increase of: +20.3%

    [ 3] value-added tax:

    Jan-Jun 2013: 5,179.0
    Jan-Jun 2016: 6,219.0

    increase of: +20.1%

    [ 4] corporation tax:

    Jan-Jun 2013: 2,073
    Jan-Jun 2016: 3,178

    increase of: +53.3%

    [ 5] number of overseas tourists (i.e. excluding N. Ireland)

    Jan-May 2013; 2,488,500
    Jan-May 2016: 3,464,800

    increase of: +39.2%

    [ 6] volume of milk output:

    Jan-May 2013: 2,119.6 litres
    Jan-May 2016: 2,715.2 litres

    increase of: +28.1%

    [ 7] volume of building and construction output:

    Jan-Mar 2013: index 86.5
    Jan-Mar 2016: index 114.4

    increase of: +32.3%

    [ 8] number of new house completions:

    Jan-May 2013: 2,987 units
    Jan-May 2016: 5,587 units

    increase of: +87.0%

    [ 9] total floor area for which planning permissions granted:

    Jan-Mar 2013: 930
    Jan-Mar 2016: 1,280

    increase of: +37.6%

    [10] number of private cars sold:

    Jan-Jun 2013: 49,503
    Jan-Jun 2016: 97,490

    increase of: +96.9%

    [11] number of new goods vehicles sold:

    Jan-Jun 2013: 6,786
    Jan-Jun 2016: 17,134

    increase of: +152.5%

    [12] volume of retail sales:

    Jan-May 2013: index 90.9
    Jan-May 2016: index 115.6

    increase of: +27.2%

    [13] volume of industrial production (all industries):

    Jan-Mar 2013: index 87.0
    Jan-Mar 2016: index 146.6

    increase of: 51.1%

    of which

    [14] volume of industrial production (traditional industries):

    Jan-Mar 2013: index 102.9
    Jan-Mar 2016: index 122.2

    increase of: +19.8%

    [15] volume of industrial production (modern industries):

    Jan-Mar 2013: index 92.7
    Jan-Mar 2016: index 164.5

    increase of: +77.5%

    [16] volume of industrial production (FOOD sector):

    Jan-Mar 2013: index 117.9
    Jan-Mar 2016: index 141.0

    increase of: +19.6%

    [17] volume of industrial production (NON-METALLIC MINERALS sector):

    Jan-Mar 2013: index 71.6
    Jan-Mar 2016: index 96.2

    increase of: +34.4%

    [18] volume of industrial production (BASIC METALS sector):

    Jan-Mar 2013: index 92.4
    Jan-Mar 2016: index 123.9

    increase of: +34.1%

    [19] volume of industrial production (CLOTING, TEXTILES & LEATHER sector):

    Jan-Mar 2013: index 72.6
    Jan-Mar 2016: index 80.8

    increase of: +11.3%

    [20] volume of industrial production (COMPUTERS, ELECTRONICS & OPTICALS sector):

    Jan-Mar 2013: index 76.4
    Jan-Mar 2016: index 144.7

    increase of: +89.4%

    [21] volume of industrial production (PHARMACEUTICALS sector):

    Jan-Mar 2013: index 88.7
    Jan-Mar 2016: index 178.4

    increase of: +101.1%

    [22] volume of industrial production (OTHER MANUFACTURING sector):

    Jan-Mar 2013: index 110.5
    Jan-Mar 2016: index 150.8

    increase of: +36.5%

    [23] volume of industrial production (ENERGY-PRODUCING sector):

    Jan-Mar 2013: index 99.6
    Jan-Mar 2016: index 117.5

    increase of: +18.0%

    So, between 2013 Q1 and 2016 Q1 there was a boom in milk production, a boom in tourism, a boom in manufacturing, a boom in construction (admittedly from a low base), a boom in car sales, a boom in goods vehicle sales, a boom in retail sales and a boom in tax receipts.

    If sales of goods vehicles (which is categorised as investment) rose by 152.5% between Q1 2013 and Q1 2016, why should it be difficult to believe that overall investment in machinery rose by 30%-40%, the figure the CSO gives?

  9. More corroboration of growth.

    Approximate figures for increase in tax revenues between Jan-Jun 2013 and Jan-Jun 2016 in EU15 countries:

    [ 1] Ireland +28.5%
    [ 2] Sweden +13.0%
    [ 3] Luxembourg +13.0%
    [ 4] Germany +12.0%
    [ 5] Austria +11.0%
    [ 6] U. Kingdom +10.0%
    [ 7] Spain +7.0%
    [ 8] France +7.0%
    [ 9] Finland +5.0%
    [10] Portugal +4.0%
    [11] Netherlands +4.0%
    [12] Belgium +3.0%
    [13] Italy +3.0%
    [14] Denmark +2.0%
    [15] Greece -4.0%

    Despite tax cuts, growth in tax revenues in Ireland miles ahead of any other EU15 country. Tax revenues approximately 5-6 times the EU15 average. So, why wouldn’t growth be 5-6 times the EU15 average.

    1. Do you think that our uber performance might allow us to build a few houses, and put roofs over the heads of the homeless.

      1. My conscience is clear on this issue. I totally agree with you about the need to build houses. If you check through my posts all the way back to 2009 I always said that house-building had been allowed to fall far too much.I said it ad nauseum on here. I repeatedly ridiculed those politically-motivated commentators who greatly exaggerated (by a factor of 10) the ‘surplus’ of empty houses and who made ludicrous claims about Celtic Tiger 1 under FF being all due to house-building. They were responsible for house-building falling far more than was necessary. I won’t name them, but you know who they are. Also, over-estimation of net emigration and under-estimation of population growth were additional factors.

        Nevertheless, I am pleased to note that house-building is now recovering strongly. The trough year was 2013, when the number fell to 8.300. In Jan-May 2016 the number of new house completions was 87% higher than in Jan-May 2013. It looks like it will be back up to 15,000 in 2016. Still not enough and not as good as FF did, but its getting there. On these trends it should hit 25,000 in 2-3 years. Incidentally, the number of new house completions expected in the U. Kingdom this year is 125,000 (corresponds to about 9,000 in Ireland).

  10. Ireland is the tax evasion pirate bay of US software companies. Trivial patents are the assets.

  11. More corroboration of growth.

    Changes in the unemployment rate between Jun 2012 and Jun 2016 among EU15 countries:

    [ 1] Ireland -7.3%
    [ 2] Spain -5.0%
    [ 3] Portugal -3.9%
    [ 4] U. Kingdom -2.9%
    [ 5] Greece -1.6%
    [ 6] Denmark -1.5%
    [ 7] Germany -1.2%
    [ 8] Sweden -0.7%
    [ 9] France +0.2%
    [10] Netherlands +0.6%
    [11] Italy +0.8%
    [12] Austria +1.0%
    [13] Belgium +1.0%
    [14] Luxembourg +1.1%
    [15] Finland +1.2%

    Almost half the countries showed an increase.

    1. This JTO canard always makes me laugh. A small export oriented economy has a lower unemployment rate and trend than all of its target markets. Those idiots can’t even run their economies to absorb our exports.

  12. Seamus Coffey has produced his usual brilliant analysis, so none of the following comments are directed at him.

    Some of the comments in the media are absurd and simply show that many journalists don’t understand statistics. For example, it is claimed that the growth is due to a large increase in investment in planes. But, this is absurd. An increase in purchases of planes is counterbalanced in the GDP figures by an increase in imports. The net effect is small. There are other examples whereby a large increase in one aggregate that adds to GDP is counterbalanced by a corresponding increase in another aggregate that subtracts from GDP. SC has explained them much better than I can. But, its obvious many journalists simply don’t understand them.

    We need to assume that the CSO knows what they’re doing. I have seen no evidence that this is not the case. In some areas of economic activity, Ireland is a small part of a chain of activity. The CSO are perfectly aware that only that part of the chain that occurs (GDP) or adds to economic value (GNP) in Ireland should be included in Ireland’s GDP and GNP figures. For example, let’s say Ireland won the contract to paint the American space shuttle. That might result in an import of $50 billion to Ireland when it arrived, and an export of $50 billion plus a few $1,000 when it left newly-painted. We have to assume that the CSO would know that only the added-value for painting done in Ireland should be included in Ireland’s GDP and GNP figures. I have total confidence that this is the case, and its absurd that their competence in this respect is being challenged by lots of commentators and twitterers with very limited statistical expertise.

    I’m sticking to my view that today’s figures are perfectly sound, albeit with a ‘one-off’ windfall factor (due to currency movements) that I mentioned in my first post. Its the combination of a very high underlying rate of growth (in the range 8%-10%) plus this ‘one-off’ windfall factor that has produced exceptional GDP/GNP growth in 2015. If the Irish punt had been devalued by around 15% v the dollar and sterling at peak Celtic Tiger 1 in 1995-97 (like the euro was in 2013-2015) its likely that those years would have produced growth figures similar to today’s. The ‘one-off’ effect of this windfall factor should be smoothed out when we look at the figures over a longer period than just one year.

  13. Apologies for so many posts today. While you’ve all been slaving away, thanks to King Billy and his white horse I’ve been on holiday this week. But, this will be my last.

    Today’s figures are bound to have dramatic political consequences, not just in Ireland.

    This derives mainly from the fact that Ireland has now broken clear of the U. Kingdom in the league table of GNI per capita.

    Forget GDP. I have never claimed its the best measure. I prefer GNI.

    I estimate that GNI per capita (PPP-adjusted) will be 40% higher in Ireland than in the U. Kingdom in 2016. A complete vindication of 1916. This gap is unprecedented. But, as the song says ‘there’s more to come’.

    With Brexit coming, and given Ireland’s high investment rate, falling debt levels, huge balance-of-payments surplus, and moving into budget surplus, all polar opposites of the situation in the U. Kingdom, there is every expectation that GNI per capita in Ireland will be 60%-70% higher than that in the U. Kingdom by 2020.

    This will have the following consequences.

    (1) In Republic of Ireland: The Left and Independents are sunk. Recent polls show the combined FF/FG vote back up to 56%-57%. It was just over 40% in some polls at the depth of the recession. I expect their combined vote to keep on rising and eventually reach the level it was at before the 2008-2011 global recession (mid-60s). But, I wouldn’t be sure how it will be distributed as between FF and FG.

    (2) In N. Ireland: A resurgence in peaceful nationalism, esp if FF (and possibly FG also) start organising north of the border and drive out SF. Combined with Brexit, Ireland’s re-emergence as the wonder economy of Europe (which has actually been happening for 3 years, but only became known worldwide today) will hasten a United Ireland. Delicious irony that this should happen on 12th July.

    (3) In Scotland: Ditto as in N. Ireland. An independent Scotland now inevitable.

    (4) In the rest of the U. Kingdom: Highlights absurdity of Brexit. Ireland booming inside the EU while the U. Kingdom struggles outside the EU will dumbfound the Brexiteers and the Brexiteer media and make ‘Remainers’ very angry at how the electorate were duped. Expect a swing back to pro-EU sentiment. Probably too late though.

    (5) U. States: Completely discredits the argument of Paul Krugman that high government spending is necessary for economic growth. No wonder he’s been tweeting so angrily today. Completely vindicates the Republicans’ argument. I’d be surprised if the Republicans don’t cite Ireland’s super-growth as an argument in their favour in the coming election. Just unfortunate that they don’t have a better candidate than Donald Trump to exploit it this year.

    1. I liked this bit in particular.

      “The other thought I had was the silliness of some media and financial market reactions to small changes in GDP from what they had expected. As the Irish example has inadvertently reminded us, GDP is an estimate, a more or less rough stab at the aggregate level of economic activity. It comes with various kinds of measurement and survey error, and has complex and debatable inbuilt assumptions, and not just the Irish ones around intellectual property and official domicile. The measurement of the output of the financial sector, for example, is a contentious issue.”

      NZ has the good fortune not to be subject to the EU’s fiscal rules.

      It is, of course, open to any Irish government to adopt – and actually implement – a sensible form of top-down, multi-annual budgets based on realistic data, which are not lacking (consumption, employment, tax take etc.), and which would fit easily within these rules, daft and all as they are. The paperwork setting out “Ministerial expenditure ceilings” would then be the focus of media comment. But the lure of “fiscal space”, based on a debate about forecasts rather than hard cash, is not to be resisted.

      We might even one day reach the level of sophistication of NZ.

      http://www.treasury.govt.nz/publications/guidance/publicfinance/pfaguide/02.htm

  14. Oooh the papers today are triumphant. Krugman really helped them out with the Leprechaun Economics quote.
    The IT says “don’t be fooled by bizarre figures”.
    But who is “fooled”?

    I haven’t heard anyone claim the figures represent something they don’t.
    It was immediately explained why the numbers showed the big spike.
    There is no trickery here. No one is trying anything on. The figures are compiled just as they have always been. Sure, looks like the basis on which they are compiled could be changed, but the numbers aren’t propaganda, they simply are what they are.

    But JtO is right. The news is still good. Not 26% good, but probably around 7% good.

    Why does that enrage people?

    Why do the Failed State Commentators need bad news to confirm what they want to be true? That Everything is Terrible.

    It’s not.

    All the figures are going the right way. Sorry to disappoint the Failed State Junkies.

    1. “The news is still good. Not 26% good, but probably around 7% good.”

      Probably +7%? Really?

      Folks who question are ‘Failed State Commentators and Junkies’; Doomsters; Enraged? Really?

      Maybe we are just better informed about things economical, read a bit more catholically and are not fooled by PR trash. If indeed the IRL economy is currently expanding at an annual rate-of-growth of 7% – then where is this being physically (observably) manifest? What (and where) are the known problems with our economy which, if publically acknowleged, would cause a skeptical person to pause and pose a searching question? Or would that be ‘unpatriotic’?

      If global (and EU) economies are currently exhibiting an annual rate-of-growth of 1.5% or less – whence this 7%? Its a tad Black Swanish. You know what David Freedman (the statistician) said – “Statistics never lie – its the lying folk who massage and manipulate the estimates.”

    2. Sarah

      The Headlines on the Radio yesterday were that the Economy had grew by 26%. People who are economicly literate might know to take that with a pinch of salt but Joe Public may not.

      “Sure, looks like the basis on which they are compiled could be changed, but the numbers aren’t propaganda, they simply are what they are.

      But JtO is right. The news is still good. Not 26% good, but probably around 7% good.”

      John Fitzgerald said 5% yesterday. Under normal circumstances a difference of 2% in GDP growth would be huge. Just shows how quickly our bizarre universe of knowledgelessness is catching on in some quarters.

      Presenting the 26% figure has real consequences and everyone admits its a stupid figure. We need to change the methodology of calculation quickly.

  15. Given that GDP and GNI are flows, then the freakish increase in “Investment” lying behind the 2015 numbers is unlikely to repeated in later years. In fact if this inflow slows down markedly, Investment as measured will fall and drag down the GDP/GNI numbers. Are the Q1 2016 results the beginning of such an unwinding process?

    On a more political note, much has been made of the newly lower Public Debt – GDP ratio of < 80%. I presume that the ratio of Public expenditure to GDP will also look much lower. Cue a lot of preaching on the iniquity of this from Fintan O'Toole.

    But basically I get great satisfaction from they way JtO has been sticking it to the gloomsters.

  16. 1. This is the RTE News story on the issue.

    http://www.rte.ie/news/business/2016/0712/801870-cso-on-economy/

    After stating the figures it immediately provides the explanation for the jump.

    So straight away, the public were informed of the “anomaly”. Full transparent information. No propaganda. No Phd’s required. Anyone can understand it.

    2. On the figures themselves.

    Fine let’s change them BUT don’t you have to change them for ALL of Europe? They’re compiled on an EU wide standard? Isn’t that just the point other posters have been making?

    They weren’t tweaked to artificially inflate the economy. They are a consequence of the method of calculation.

    If the CSO changed the method when they didn’t like the result THAT would be something to worry about.

    What I don’t like is the suggestion that it suits the gov (and perhaps the gov encourages) to have the flaw.

    De rules is de rules. So change the rules.

    3. on 5% vs 7%

    Argue the toss, but the point is the same. It’s going up. That’s good right?

    1. Hi Sarah

      No one, I have read here, is saying growth in the Irish economy is a bad thing. All anyone is asking is that we try to measure the country’s growth in a meaningful way.
      When Dell were moving manufacturing to Poland there was a worry Ireland would loose 2% of our GDP as all the PC’s for all of Europe were produced here. They were able to continue to say production was happening in Ireland so there was no fall.
      Now 3 companies are doing accounting tricks to say about 10 times that value is has been added to our economy.

      When a developed economy proclaims such a ridiculous growth rate it doesn’t make us look like high fliers.
      Its makes us look like a ponzi tax haven.
      People who cheerlead that type of thing are not doing Ireland inc. any favours.

      I still would like to know what are some of the consequences of our debt to GDP going down to 78% in relation to our commitments under debt reduction rules?
      Does this herald a loosening of the rules currently preventing the government doing a major social housing borrowing initiative, on balance sheet?

      We already know the increase in GDP will lead to a large increase in the amount we will be expected to contribute to central EU funding.

      1. That’s a very fair point. Once it’s clear that Ireland isn’t messing with the figures or trying to pretend we’re something we’re not. It’s the EU standard method and no one was misled and that the underlying trend is still very positive.
        My husband has spent most of the recession either unemployed here or working abroad. He was offered 2 jobs here in last 8 weeks. The Fine Gael recovery 😀 Has arrived in Enfield ! 😍

    2. Depends on what is driving it and whether or not it is sustainable. Anglo’s balance sheet grew and it was great, right ?

    3. Sarah, ” …. but the point is the same. It’s going up*. That’s good right?

      Yeah, maybe. But what if’n I’m upside-down, sort of. Then ‘down’ would be indeed ‘up’.

      *The key economic performance characteristic (for a physical process) is that more and more and more physical stuffs get produced (up). Like, stuff you can see, feel, smell, taste; ie. non-virtual, experiential stuff. The corresponding performance characteristic is that lots and lots and lots of other physical stuffs get consumed (up also). Its these latter that seem to be either static, or declining. So, what’s the algebraic sum on those two characteristics? Positive? Zero? Negative? Its usually positive, due to the inherent attributes of our amazingly productive technologies – and you cheerfully ignore the nett increase in Entropy!

      Some key economic nutrients are currently displaying significant cost/price decreases. Why? Reduced (overall economic) demand? Might a distal cause be that it is the inability of many mid and low-income consumers to afford to continue to consume at their prior rates, is also a factor? Hmmmmm.

      Overall economic outlooks and our local version may be numerically positive, but its not looking (reality wise) good. What is looking good is the Disc World virtual stuff; credit money and financial assets. Looks like ‘churning’, feels like ‘churning’: it is ‘churning’. Meanwhile, back in the real physical world. Non-service type of employments? Wage and salary rates? Debt stress and defaults? Hmmmmm.

      “They [the estimates] are a consequence of the method of calculation.” They sure are – its undiluted Orwell Speak: KO!

  17. What’s remarkable is that despite all the international media attention, and all the public policy implications, very few Irish outlets are willing to critically discuss and analyse what has actually caused the complete distortion of the nation’s accounts: Ireland’s facilitation of global corporate tax avoidance.

    1. @Aidan Regan: “Ireland’s facilitation of global corporate tax avoidance”. It takes at least two to tango in this case. Much of the avoidance is driven by the U.S Corporate Tax code, which (inter alia) combines a high headline rate with a provision that it need not be paid by U.S companies as long as they keep the money offshore.

      From a U.S. government perspective this looks like sheer madness. Blame the extreme partisanship of domestic U.S. politics (especially in the lower house of Congress). Don’t blame Irish policy for this.

      1. I look at this from a European and international perspective, not an Irish perspective.

        From the Irish perspective the debate always evolves into a blame game. “Don’t blame the Irish, blame the US tax code”. Personally, I don’t care who is ‘ultimately’ to blame (and on this note, logically speaking, it’s clearly the MNC’s themselves). What matters is that it’s happening. It’s real. It’s a serious problem. It creates huge macro distortions. And it has massive distributional implications. Ireland facilitates it. Yet the media-political-academic elite don’t (or can’t) seem to talk about it.

          1. Well, at least that’s a start. Ireland benefits from global corporate tax evasion. Or to put it another way, Ireland gains distributional benefits from facilitating the richest companies of the world avoid paying tax. That’s empirically true.

            Now, let’s step outside Ireland for a moment and make the case for facilitating corporate tax avoidance to our Eurozone partners, international organisations, US/EU citizens and jurisdictions who lose out.

            Is it something that only Ireland should facilitate or is it something that every nation-state should pursue?

          2. If a company carries out activities in a country that country has the right to tax the profits generated by those activities. There is no unilateral action that Ireland can take to deny them this right. Disputes between countries are resolved using the terms of tax treaties that are mutually agreed. There is no provision in the Irish tax code that takes a taxing right from any other country. If there is I’d be delighted if you told us about it.

  18. It seems to me that a consensus would rapidly exist around a number of points, summarised as follows.

    (i) Ireland is an outlier in the matter of the the reliability of GDP/GNP data because of the impact of FDI relative to the overall size of the economy

    (ii) global statistical standards are not about to change as a result

    (iii) the EU fiscal rules do not work very well, if at all, for reasons unrelated to GDP/GNP indicators but because of problems associated, in particular, with the calculation of the structural deficit

    (iv) these rules are, however, embedded in the current EU legal order and are, equally, not about to change anytime soon

    (v) they are, in any case, mainly a way of exerting pressure politically on countries not managing their public finances, and hence their economies, correctly, a pressure that politicians in the countries concerned should NOT require in the first place if they are doing their jobs properly

    (vi) Ireland clearly does not have, for the moment at least, neither the required political will, nor the necessary administrative and budgetary structures, to join those countries that do

    (vii) the impact of Brexit, and the furore about clearly ephemeral economic growth data (which appear to make a nonsense of the application of the rules to Ireland in any case) with any luck, will help concentrate minds and produce a series of budgets which will help remedy the lack identified at (vi).

    One lives in hope.

    1. For neither/nor read either/or.

      One of the more dubious “distributional benefits” of the startling GDP revisions will, one would imagine, be some increase in the national contribution to the EU budget. (Post Brexit, there may be a major overall funding gap if the UK does not agree terms with the EU27 on joining the EEA equivalent to those applying to Norway.)

      http://ec.europa.eu/eurostat/statistics-explained/index.php/Monitoring_GNI_for_own_resource_purposes

  19. I think you are missing my point. Your argument is, of course, factually correct. It is the empirical reality that has generated an entire industry of corporate tax lawyers, all of whom are committed to ensuring global tax avoidance remains legal.

    I am not suggesting that Ireland is actively removing other countries taxing rights. I am suggesting that if every country pursued the Irish strategy then the ultimate outcome is a global corporate tax regime of 0%.

    Taxation is not, and never will be, a purely “technical” issue. It goes to the heart of distributional and democratic politics. The social state, as it has developed throughout the 20th century, was made possible because of the creation of taxation.

    Hence, any public policy regime that facilitates tax avoidance, regardless of whether it is legal or not, is likely to come in for public criticism. Ireland is rightly critiqued from all over the world, particularly in Europe, for facilitating corporate tax avoidance.

    My point is that it’s somewhat remarkable that within Ireland, this criticism is noticeable by it’s absence. Further, I don’t think defending corporate tax avoidance serves the interests of the real FDI-led export model that underpins Irelands economy.

    1. I’m not sure of many of the points you are making.

      You say: “It is the empirical reality that has generated an entire industry of corporate tax lawyers, all of whom are committed to ensuring global tax avoidance remains legal.”

      By definition tax avoidance is legal. If it is illegal than it is evasion. No matter what the tax rules are people will rightly seek to minimise tax bills. If governments want to collect more tax, change tax laws.

      You say: “I am not suggesting that Ireland is actively removing other countries taxing rights. I am suggesting that if every country pursued the Irish strategy then the ultimate outcome is a global corporate tax regime of 0%.”

      Ireland collected €6.9 billion of Corporation Tax last year. That is 2.7% of GDP. If every country pursued the Irish strategy corporate income tax revenues would rise.

      You say: “Taxation is not, and never will be, a purely “technical” issue. It goes to the heart of distributional and democratic politics. The social state, as it has developed throughout the 20th century, was made possible because of the creation of taxation.”

      Ireland’s tax and transfer system has a greater impact in reducing inequality than in all other OECD countries. Corporation tax is not an effective tool for distribution. You don’t know who you are taxing.

      You say: “Hence, any public policy regime that facilitates tax avoidance, regardless of whether it is legal or not, is likely to come in for public criticism. Ireland is rightly critiqued from all over the world, particularly in Europe, for facilitating corporate tax avoidance.”

      Again, by definition, tax avoidance is legal. If EU countries want to collect more tax from companies operating in their countries that is their business. France are investigating Google and their primary concern is what happens in France. If Google’s activities in France merit Google paying more tax in France then Google will pay more tax in France. What does, or does not, happen in Dublin isn’t much of a factor in that. And in the Apple case the EU are not investigating whether Apple should have paid more tax in EU countries, they are investigating whether Apple should have paid more tax in Ireland. The loss to other EU countries is nil [and if Apple does pay more tax in Ireland the loss will be suffered by the US, in theory at least.]

      You say: “My point is that it’s somewhat remarkable that within Ireland, this criticism is noticeable by it’s absence. Further, I don’t think defending corporate tax avoidance serves the interests of the real FDI-led export model that underpins Irelands economy.”

      Do you read the Irish media? There are a huge number of stories on corporation tax. Very very few of them take a positive slant. Tax is a factor when companies make FDI decisions. It was ever thus. Ireland has a low tax rate that attracts investment. And also has a regime that more by luck than design is compatible with availing of deferral provisions in the US tax code. There can be no doubt that this is hugely successful, for now.

      Each year US companies pay €6 billion of salaries, undertake €3 billion of fixed capital investment, buy €3-4 billion of goods and services from Irish suppliers and pay (up to 2014 at any rate) €2 billion of Corporation Tax here. That is something around €15 billion a year, every year [and if probably higher now given the 2015 surge in Corporation Tax]. I’d certainly put up with a few negative headlines for €15 billion a year.

      1. @Seamus

        You say “Ireland collected €6.9 billion of Corporation Tax last year. That is 2.7% of GDP. If every country pursued the Irish strategy corporate income tax revenues would rise”.

        Again, technically this is true, but this misses the point I am making. The question I initially proposed was as follows:

        First, what would happen if every nation-state pursued Irish strategy of facilitating corporate tax avoidance (let’s take the Eurozone as an example)? Second, do you think this is something that should be encouraged?

        If you think yes. Then fair enough, that’s consistent. The UK cuts it’s tax, France does the same, Ireland follows. Then the Baltic and Visegárd states follow suit. The logical end game is a 0% global corporate tax regime.

        Now, my hunch is that no one could seriously agree to this, primarily for normative reasons. It’s basically saying to workers, you pay 43% on your 50k per annum. But the multi-million MNC you work for, pays nothing. Be thankful for a job.

        The distributional implications of global corporate tax avoidance are not that different from what happens locally. Take Greece. A corner shop in Athens avoids paying taxes. The local authorities turn a blind eye. The corner shop around the corner is compelled to do the same thing, otherwise they are disadvantaged. And so on.

        In the end – everyone loses out. It’s a collective action problem. It’s fine if one country does, but if everyone does it?

        Hence, my point is that from a purely nationalist self-interest Ireland might appear to be doing great. But I don’t look at these things from a purely Irish perspective. I look at it from an international and European perspective.

        You also say “If EU countries want to collect more tax from companies operating in their countries that is their business”.

        If this was 1950, then perhaps. But it is not. We live in a globally interconnected world. We share a currency with 18 other countries. If one of these countries imposes a cost, or a loss, on another, then it is everyone’s business.

        Corporate tax avoidance falls precisely into this domain. In a world of footloose capital, if one country does it, other countries lose out. The only logical response from your perspective is to encourage all countries to cut i.e. race to the bottom.

        Now, admittedly, I am a political scientist, interested in international political economy. So in my world, the core puzzle is precisely how and why independent nation-states to cooperate over shared economic policies.

        You say “Do you read the Irish media? There are a huge number of stories on corporation tax. Very very few of them take a positive slant”.

        Perhaps I am wrong. Maybe links few Irish media articles that explicitly say that what underpins the distortion of Irelands national accounts is Irelands role in facilitating corporate tax avoidance?

        Do you read the international media? If you go to La Monde, il 24 Ore, El Pais, Deutsche Zeitungen etc, you’ll see that they are far more critical (and explicit) about Irelands role in facilitating corporate tax avoidance.

        What you’ll find in other Euro countries is deep frustration with Ireland, precisely because of the beggar thy neighbour implications of our approach to using low corporate taxes to lure investment, in a context of an unemployment crisis everywhere. Again, from a purely narrow self-Irish interest, one can legitimately say, well, who cares.

        Even across the water in the UK, they are far more explicit about what’s actually happening. See: http://www.independent.co.uk/news/business/news/ireland-s-economy-grows-263-in-2015-as-corporations-flock-to-low-tax-rate-a7133321.html and https://www.theguardian.com/business/2016/jul/12/irish-economic-growth-revised-figures-foreign-investment-aircraft

        You say: “each year US companies pay €6 billion of salaries, undertake €3 billion of fixed capital investment, buy €3-4 billion of goods and services from Irish suppliers”.

        I don’t doubt any of this. I’ve published on it. I’ve spend a good bit of time in Silicon Valley – and have a lot of interest in the tech-sector. So, there is no doubt US-FDI is the core driver of Irelands export growth regime.

        But I’ve also come to the conclusion that relying on corporate tax to attract investment is a) completely overstated and b) a dead-end game. What matters now is the quality of housing, education, childcare, transport and public services.

        1. Aidan,

          One of the main reasons international media is more critial is because their elected representatives want to give the impression that something other than the laws they pass is at fault. This is evident in the American, Australian and UK parliamentary hearings that I have followed. MEPs have also expressed similar views though to be fair they have limited legislative power in this area.

          You keep saying Ireland facilitates tax avoidance not how this actually happens. We have a low tax rate but that’s for profits in Ireland while the accusation is that Ireland reduces the amount of tax that other countries can collect. But just because something is said doesn’t make it true.

          If this is the problem can you give us one change that can be undertaken in Ireland that will increase the amount of tax collected in other countries. Because if you don’t have an action that Ireland can take what is all the noise supposed to achieve? So one change we can make that should be introduced. Saying we should stop facilitating tax avoidance is a little hollow to be honest. Let’s get something specific.

          1. Aidan

            i think one key issue you’ve failed to realise is that the corporations paying all this additional tax in Ireland were previously paying 0% in genuine tax havens in the Caribbean. So the Irish tax system appears to have persuaded them to pay more tax, not less, in 2015 vs 2014 (Apple’s foreign taxes more than doubled)

          2. @ Seamus Coffey

            can you give us one change that can be undertaken in Ireland that will increase the amount of tax collected in other countries. Because if you don’t have an action that Ireland can take what is all the noise supposed to achieve? So one change we can make that should be introduced. Saying we should stop facilitating tax avoidance is a little hollow to be honest. Let’s get something specific.

            We are moving to a situation of more transparency on tax rulings and the systems where local companies were screwed while senior tax officials agreed deals with high-paid professionals working for MNCs will in future be harder to shield from public view.

            Abuse of permanent establishment rules and the acceptance of fake invoices for billions of dollars or euros from letter-box companies is likely to get more attention in future.
            Starbucks for example has been able to avoid paying taxes in the UK for years by moving profits elsewhere via invoices for whatever. That sort of cheating is unlikely to be tolerated in future — in systems that lack transparency, what is evasion can become avoidance thanks to a benign tax inspector.

            Tax authorities can turn a blind eye to artificial transactions or take a contrary view depending on the economic climate.

            As to what Ireland could do, after all the huffing about transparency, the Double Irish tax dodge is set to end by 2021. The Irish authorities do not know how many active offshore firms exist and it’s clear that it hasn’t had a clue about the billions that have been technically routed each year through Apple’s Irish shell companies, which have Cork addresses.

            Apple is already paying more foreign taxes thanks to the US Senate investigation. Google is under pressure in many countries about its taxes.

            Whether Trump or Clinton will be the next US president, there will be pressure for reform and the rise of populism in response to inequality will keep a focus on tax cheating.

            1) Remember in 2013 after the revelation about Apple deciding in 2006 that its Irish shell companies which operated onshore and offshore avoiding the need to use the Double Irish tax dodge, were stateless for tax purposes, the taoiseach and ministers coupled with the big professional services firms, protested that the Irish tax system was rules based, transparent and NO special deals had ever been available?

            Given the evidence of public tribunals and the barking of dogs on the street, these claims lacked credibility but you may not agree?

            Do you believe that the typical Irish SME is afforded the same rights as an MNC represented by powerful professional services firms?

            MNCs can make large value charges for intangibles such as intellectual property (IP) via invoicing by shell letter-box companies in places like Bermuda, but would you agree that a local company is likely to get more scrutiny and directors could risk imprisonment?

            In my first job, invoices in German for “technology licensing” used to arrive from Switzerland. It was a useful way of transferring funds tax-free.

            2) In the UK HSBC bank hired a senior executive of HM Revenue & Customs, could that happen in Ireland where conflict of interest seldom gets serious attention?

            http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11490469/Former-HMRC-boss-I-took-job-at-HSBC-to-help-fix-bank.html

            3) Has a prominent MNC (foreign multinational firm) ever appeared on the Irish published list of tax defaulters?

            4) When Apple Operations International and other shell companies ceased submitting annual tax returns in 2006, who authorised the move?

            5) Apple’s Irish shell companies were able to present themselves to other tax jurisdictions as typical onshore firms, who in Ireland authorised these unusual arrangements? Until the US Senate investigation, in contrast with Microsoft, Apple, Facebook and others, Apple was able to shield its tax arrangements from public scrutiny.

            They’re was surely some special deal when a shell company could be both offshore and onshore, paying tax on some activities?

            6) Returns by US MNCs to the US Bureau of Economic Analysis include funds transferred to Irish shell companies in places like the Cayman Islands, as related to Irish affiliates.

            7) The Irish Government in 2014 argued that low single digit effective tax rates based on inclusion of transfers to offshore Irish companies were based on a “flawed premise.”

            Seamus Coffey was commissioned by the Dept Of Finance to work with civil servants to produce a paper on effective tax rates. They produced a fudge:

            The spread of estimates ranges from 2.2 per cent to 15.5 per cent for the most recent data available.

            Apple had a 2% foreign tax rate on profits generated by 65% of its revenues in 2012. Flawed premise indeed but in its case it was a case of Bodhar Uí Laoghaire.

          3. @ MH,

            What tax system allowed US MNCs to move their economic rights to Bermuda, Cayman etc?

            The US system! It had and has nothing to do with Ireland. These companies developed this technology in the US and put in place an agreement in the US to transfer the rights to that technology to the US. The US are investigating the transfer Facebook put in place for its technology in 2010. And rightly so. Maybe they should investigate a few more. Payments for the right to use that technology should be made. And they should be made to the US. The destination of the payments is not something under Ireland’s control.

            Would Irish companies get more scrutiny if they attempted to make such payments to the Cayman?

            Absolutely they would and they should. The comparison is to the ability of US firms to place the economic rights to their technology in no-tax jurisdictions and whether the Revenue would allow these transfers to take place at the same rates. I hope they wouldn’t. Again the payments for the use of the technology are fine. All companies, MNCs and SMEs, should get similar treatment for these payments. We have control over the destination of the payments by Irish companies; the US has control over the destination of the payments by US companies.

            Why did the “double irish” need a “dutch sandwich”?

            The reason is, of course, because Ireland would have charged a withholding tax if the payments were made directly to Bermuda or Cayman etc. We don’t have a double tax agreement with them. Under the EU directive on patent royalties we cannot charge a withholding tax on payments that go to another EU country.

            Did Ireland abolish the “double irish”?

            No. But there was great publicity over saying it was abolished. An Irish-registered company managed and controlled in Malta or the UAE will be resident in those jurisdictions. Transfers from an Irish-registered, Irish-resident trading company to a Irish-registered, non-resident company in Malta or the UAE will still be eligible for the “same country exemption” in the US tax code. This “same country exemption” being the reason for the “double irish” – two companies registered in the same country.

            And here is a question that you must answer.

            What was the effective tax rate on Apple’s domestic profits in 2012?

            You say that the effective rate on Apple’s foreign profits in 2012 was 2%. I agree but apply the same methodology to give us the effective tax rate on Apple’s domestic profit in 2012. Come on, you put Apple’s foreign tax over its foreign profit and got 2%. What is the answer when you put Apple’s domestic tax over its domestic profit. And no cut and paste of stuff we have read many times. What was the effective tax rate on Apple’s domestic profits in 2012? Put up the number.

    2. The point is to what extent the 2 fingers approach to economic solidarity as evidenced by loose tax policy influences the judgement of those with the funds when Ireland runs out of them, as it did in 2010. The most pertinent thing that can be said about neoliberal fiance is that it is inherently unstable and prone to crisis.

  20. It’s like the old (2010) days. Three threads on the same topic, and lots of comments, including from Mssrs Honohan, McCarthy, Bond, Optimist. All we need now is Morgan Kelly to write an article in the Irish Times.

    1. Welcome back. You might well get your wish come true. I wouldn’t be at all surprised if Morgan Kelly was wheeled-out from his self-imposed purdah. The Irish Times is in a complete tizzy. Given its historic links to MI5 and the emotional effect of seeing the last-ever U. Kingdom Prime Minister taking office today, one last desperate effort may be made to delay the inevitable. How absolutely dreadful if the Scots and the Northern irish came to see that a country can fare much better economically outside the U. Kingdom than in it. Something needs to be done, and I’m sure D’Oliar St will do it,

  21. A lot of metrics are currently nonsense given that asset values are so far off fundamentals. The Fed’s models misfire because the Phillips curve doesn’t work when the richest 1% of Americans own 50% of everything. Phillips developed his theory when payrises were a feature of macro.

    “The Atlanta Fed’s GDPNow model estimates first-quarter GDP growth at just 0.3 per cent. This extends the long-running conundrum of punchy jobs growth combined with damp GDP data, Mr Bullard said, adding his bank’s model had been repeatedly indicating that 3 per cent growth was “just around the corner” and this was not happening. ”

    The notion of debt as risk free is highly questionable when USD 12tn in sovs. are priced off negative yields that are going ever lower.
    https://www.youtube.com/watch?v=IKe2OfXLxuc

    Turns out the zero bound is only mathematical construct. Who woulda thunk it ? Certainly not Milton Friedman.
    The trend is your friend. Until the thing falls over

    The basis for corporate finance is incoherent. You don’t actually need to get a return for taking a risk. You can just throw some of the money away because the Ponzi dynamics are attractive. .

    Nobody does old fashioned stodgy stuff for demand like invest in growth or pay workers for productivity improvements. It’s all driven now by insanity like stripping firms of equity for buybacks and tax avoidance. I am not surprised GDP is banjaxed.

  22. WOW! The anger of the mob at the CSO is amazing. And also highly comical. I’m laughing so much at their anger and rage that (for the first time since 1955) I might not make it to the Ulster Final on Sunday. I haven’t seen such fury since Belfast in 1972. I hope the CSO are being given police protection. And Michael Noonan may become the first Minister for Finance in the history of the world to have to resign because the figures were too good. Foreigners reading this site must be amazed at such anger, not for the figures being so bad, but for the figures being so good. So, let me help explain it for them.

    The root cause is that, when the global recession struck in 2008, a large section of Irish society set their hearts on seeing total economic collapse. This section of society was heavily concentrated in the media and in academia, but it existed outside it too. They longed for economic armageddon to bring about the political change they wanted. Back in their glory year of 2010 they were certain it would happen. They filled sites like this with their doom prognostications. Their leaders became global celebrities. Alas, in the past few years their hopes and dreams have been shot to pieces. The cruelty of it all! They are now a beaten bedraggled army whose erstwhile leader has gone into self-imposed purdah.

    The straw that broke the camel’s back was the CSO publication on Tuesday, showing economic growth (GNP) of 18.5% in 2015. I don’t believe this figure accurately indicates economic growth in Ireland. No one does. No one is claiming it does. It contains a number of ‘one-off’ windfall factors that won’t be repeated. But, even stripping these out, and combining the figures with other figures for growth in employment, tax receipts, milk output, car sales, goods vehicle sales, new house construction, tourist numbers, retail sales, industrial output, PMI surveys, not to mention tumbling unemployment and vanishing budget deficit, all confirm unanimously that the Irish economy is surging ahead and growing at by far the fastest rate in Europe.

    The response of the doomsters is to ‘shoot the messenger’ who brought them such ‘bad’ news (by ‘bad’ I mean, of course, ‘good’ to normal people). That is, the CSO.

    The claim is being made that the CSO have been incompetently and systematically publishing phoney growth figures.

    So, let’s look at the evidence (something that the doomsters never do). To do that properly we need to look at the figures over a long period of time to iron-out any one-off distortions in individual years. So, here goes.

    These are the figures for GNP growth in Ireland between 1970 and 2014:

    1970: 35,928 billion euros in constant 1995 prices
    1995: 77,099 billion euros in constant 1995 prices

    then rebased by the CSO to 1995:

    1995: 78,757 billion euros in constant 2014 prices
    2014: 163,445 billion euros in constant 2014 prices

    real increase between 1970 and 2014: +345.3%

    or, putting another way, GNP in real terms in 2014 was 4.453 times its 1970 level

    This is the figure that is now under attack by the media. Its claimed that it doesn’t accurately measure growth in the Irish economy and that a better measure based on actual spending in the economy should be used instead.

    So, let’s do it. Applying the same methodology to the individual items of expenditure, we get:

    [1] personal spending:

    1970: 21,150 billion euros in constant 1995 prices
    1995: 43,222 billion euros in constant 1995 prices

    then rebased by the CSO to 1995:

    1995: 43,514 billion euros in constant 2014 prices
    2014: 87,760 billion euros in constant 2014 prices

    real increase between 1970 and 2014: +312.2%

    or, putting another way, personal spending in real terms in 2014 was 4.122 times its 1970 level

    [2] government spending:

    1970: 7,344 billion euros in constant 1995 prices
    1995: 15,745 billion euros in constant 1995 prices

    then rebased by the CSO to 1995:

    1995: 15,791 billion euros in constant 2014 prices
    2014: 26,479 billion euros in constant 2014 prices

    real increase between 1970 and 2014: +259.5%

    or, putting another way, personal spending in real terms in 2014 was 3.595 times its 1970 level

    [3] investment spending:

    1970: 6,578 billion euros in constant 1995 prices
    1995: 14,535 billion euros in constant 1995 prices

    then rebased by the CSO to 1995:

    1995: 16,053 billion euros in constant 2014 prices
    2014: 39,572 billion euros in constant 2014 prices

    real increase between 1970 and 2014: +444.7%

    or, putting another way, personal spending in real terms in 2014 was 5.447 times its 1970 level

    [4] total spending (i.e. personal + government + investment):

    1970: 35,072 billion euros in constant 1995 prices
    1995: 73,502 billion euros in constant 1995 prices

    then rebased by the CSO to 1995:

    1995: 75,358 billion euros in constant 2014 prices
    2014: 153,811 billion euros in constant 2014 prices

    real increase between 1970 and 2014: +327.8%

    or, putting another way, total spending in real terms in 2014 was 4.278 times its 1970 level

    So, using the measure the CSO uses, real GNP in 2014 was 4.453 times its level in 1970, i.e. it more than quadrupled.

    But, using the composite of measures for spending on the individual items, it was 4.278 its level in 1970. If we used this measure instead, mean annual growth between 1970 and 2014 would be reduced by well under 0.1%.

    In other words, hardly any difference at all. Claims that the CSO have been systematically over-esimating GNP growth are clearly nonsense. The media should apologise to the CSO.

    1. ok, well that’s it. JtO, I’m in love. Let’s meet outside Bewley’s on Grafton St (still under refurbishment, closed by the greed of Treasury), Wear a red carnation and carry a copy of the Belfast Telegraph and croon to me that the fundamentals are sound 🙂 Sigh.

      1. Thank you, Sarah. Its my dream one day. But, the Ulster Herald and a Tyrone rosette.

        And, as Welsh manager, Chris Coleman, said last week ‘dreams do come true’.

        More dramatic news from the CSO. Its really been their week.

        For the second census in a row, population has turned out to be almost 100k higher than previously thought.

        A population of over 5 million for the Republic alone and over 7 million for the whole island is definitely now achievable by 2020.

        Net emigration over 5-year period about one-fifth of what was previously thought. (average 6k per annum net between 2011 and 2016 v 25k-30k previously thought).

        Haven’t studied it fully yet, but it looks like Ireland was back to net immigration in the past year or two.

        Number of households also much higher than expected.

        No wonder there is a housing shortage.

        I don’t know how to break this to some people. Perhaps they should sit down with a stiff drink before reading further. But, GDP and GNP will now have to be revised UP from Tuesday’s estimates.

        And the number in employment will have have to be revised up dramatically.

        But, we’ll no doubt be told by media that the CSO got it wrong. After all, the Irish Times has been telling us for the last few years that there are only 3 people left in Connaught. Generation Emigration, my foot.

        1. JsO, you’ve just helped me put a much firmer case together for $200m of FDI in retail, real estate and renewables into Ireland; what particularly helped was the cross-EU comparison (“league table”). Which creates about 6,500 jobs (direct) and 24,000 indirect. Thank you. I’m not an Economist, but a simple business person and this post has helped clarify a lot.

    1. The KBD is only available for assets actually developed in Ireland; not assets transferred to Ireland. The modified nexus approach and all that.

      Aircraft leasing didn’t have much of an impact on the growth figure. 80 per cent of the increase in Gross Value Added was in Industry (€50 billion out of €60 billion). Aircraft leasing is a small part of the “Other Services” sector. This sector is around half the economy but contributed just one-tenth of the 2015 growth (€6 billion out of €60 billion). The growth rate in this sector was 5.8% which is not unusual at all.

      And it really is odd to characterise this as tax avoidance when the net result is that more tax is being paid – and it’s been paid to Ireland! Companies are moving these assets from no tax jurisdictions in the Carribean and The Cayman and are paying tax on the profits to Ireland. This is a reduction in tax avoidance. If tax avoidance is the issue these moves should be applauded. And with a couple of billion of extra Corporation Tax revenue each year we have plenty of reason for cheer.

      1. It’s US tax avoidance. System wise there is SFA investment in anything to do with growth. US companies are dodging taxes. they are not paying workers pay rises. They are not investing in research. the result is pathetic growth. None of this is even remotely sustainable.

  23. You could have chosen to include in your article a host of positive and irrefutable statistics about the recent performance of the Irish economy, all confirming very high growth since 2013, but, naturally, you chose not to as your objective was to do a hatchet-job. Among the statistics you could have informed your American audience of:

    (a) Ireland’s unemployment has fallen from 15.1% in June 2012 to 7.8% in June 2016 and continuing to fall rapidly (at the rate of 0.45% every 3 months, which would bring it to a full employment level of 5% by autumn next year. This is the largest fall in the EU in that period.

    (b) Tax revenues have risen by almost 30% between Jan-Jun 2013 and Jan-Jun 2016, resulting in the budget deficit dwindling to virtually zero. This compares with an average rise of approximately 8% in the EU. In contrast to Ireland, the UK budget deficit is stuck at £75 billion (4% of GDP) and forecast post-Brexit to rise. And just this week figures showed the US budget deficit soaring.

    (c) The census results published yesterday showed that all the recent claims by left-wing activists that Ireland was experiencing net emigration in the 100s of 1,000s and being depopulated were fairy tales. Ireland is back in net immigration and experiencing the fasted population growth in Europe.

    (d) The number in employment rose by 2.3% in the year to Q1 2016, the highest increase in Europe and higher than in the US. However, even this figure understates it. Following the census results, this figure will be revised up to circa 3%.

    (e) The number of overseas tourists up 15% y-o-y in the first half of 2016.

    (f) The volume of retail sales up 8% y-o-y in Jan-May 2016.

    (g) New private car sales up 50% plus y-o-y in Jan-Jun 2016.

    (h) New goods vehicle sales up 100% plus y-o-y in Jan-Jun 2016.

    (i) soaring industrial production – but you’ll no doubt claim that the CSO got those figures wrong.

    (j) Monthly PMI and ESRI surveys showing economic activity and consumer confidence surging.

    No one is asking you to believe the economy grew by 26%. The CSO didn’t even say it was. Their figure for GNP (widely accepted as more accurate than GDP) was 18.5%. Even Michael Noonan says this figure exaggerates the real growth. But, the fact that it exaggerates the real growth doesn’t make the real growth is anything other than very high, and certainly the highest in Europe. Seamus Coffey puts it at 6.5%. No economist puts it at less than 6%.

    You are indeed a worthy successor to fellow UCD academic, Professor Morgan Kelly. He hasn’t been heard of for 5 years since his famous Kilkenny lecture when he predicted, to gasps from an admiring audience, the total collapse and bankruptcy of the Irish economy, civil war, and a plague of locusts. I pray he is still alive. The UCD staff common room must be a glum place days, what with all the good economic statistics coming out.

    I see you are not even an economist, but from the School of Politics and International Relations. Perhaps you’d state what level of statistical expertise is required to get a job there, and how it compares with the level of statistical expertise required to get a job in the CSO.

Comments are closed.