The Statistical Service published full national accounts data for the third quarter last week, showing that some sectors of the economy are well past recession, while others remain in crisis.
Overall real GDP grew by 1.6% compared with the same period of 2009, posting its best performance for almost two years.
The agricultural sector was a star performer, with growth of 12.8%, although because it accounts for only 2.1% of GDP its impact on the wider economy will have been minimal.
The good news is that the large sectors of “financial intermediation” (banking) and real estate, renting and business activities grew in real terms by 3.2% compared with the third quarter of 2009.
Similarly, “wholesale and retail trade” and “hotels and restaurants” rose in the third quarter by 2.3%. These have been helped both by a better performance in tourism and perhaps the broader recovery.
These two sectors account for just under 50% of GDP.
We can see from other data on lending and exports of services that the financial services have been doing well, while the market for re-sale property was growing at least in the first half of this year.
Meanwhile, “public administration and defence, education, health and social work, other community social and personal services, and private households with employed persons”, which together account for around 24% of GDP, grew by a fairly robust 1.8%.
Construction still in the doldrums
The performance of construction is in sharp contrast to this positive story.
Value-added in construction contracted by 6.4% over the year earlier in the third quarter–an even steeper decline than in the second quarter.
This sector has been tumbling since the second half of 2008 and is probably related to the collapse in demand for new housing from abroad, especially from the UK.
This begs the question whether it isn’t time to spread our risk and target other markets.
Russia would be an obvious target. Growth in arrivals from Russia reached 52% in the first ten months of the year and we know that a large proportion of business service growth comes from Russia.
But this pace of growth of growth also raises another risk, namely that we shall become as dependent on the Russian market as we were on the UK market.
And these two markets have something in common: they are not in the euro area so are vulnerable to swings in the euro.
In the short term the Russians are probably saving our skin. But to safeguard our future we need to attract tourists, home-buyers and companies from other euro-area countries.
Fiona Mullen
Sapienta Economics Ltd
