Economy surges ahead boosted by strong exports

The economy picked-up steam considerably in the first three months of the year led by strong exports.

But personal spending fell fractionally in the first quarter, painting a conflicting picture of the recovery as separate data has shown retail sales are on the rise.

The Central Statistics Office announced revisions to how growth is calculated and said the economy grew by 0.2pc last year.

Previous estimates had gross domestic product shrinking by 0.3pc.

And 2014 got off to a strong start with robust growth of 2.7pc recorded for the first three months.

Quarterly figures are often erratic, however, and the CSO sounded a note of caution.

But the revisions were much bigger than many experts predicted and it now means that Irish GDP is estimated at €174.8bn, revised up from €164bn previously.

GDP grew by 4.1pc in the first quarter compared with the same period in 2013, with net exports driving the expansion, rising by 1.8pc. Net exports improved from €9.37bn to €9.92bn.

The surprisingly large fourth quarter contraction of 2.3pc was also revised to -0.1pc.

Economists expressed surprise at the data, particularly the minor contraction in personal spending at the start of this year. And they urged caution that volatility can

often be a feature of Irish GDP data.

The CSO data contained 25 revisions to the European System of National and Regional Accounts (ESA) for all years from 2008.

The new ESA 2010 framework this year replaces existing accounting rules and must be adopted by countries by September.

The change with the greatest impact is how Research & Development (R&D) spending is now treated. Under the new system, R&D is recognised as investment and is included as gross fixed capital formation in the expenditure approach to GDP.

This accounts for the bulk of the upward revision, while extended estimates for illegal economic activities, like prostitution and drug dealing are also included.

Building and construction was up 2.8pc in the quarter, distribution, transport and software was down 0.7pc.

Stockbrokers Davy said the data showed the economy is broadly on track to meet its forecasts for a 2.5pc expansion this year.

“The big news is that the upward revisions to the level of GDP are far bigger than expected,” said Davy economist Conall MacCoille.

Specialist bank Investec said the economy had a strong start to the year, but there were surpirses.

“The CSO estimates that personal consumption fell 0.1pc, an outcome that is at variance with the improvement in retail sales volumes seen in that period,” said Investec economist Philp O’Sullivan.

But Mr O’Sullivan said he believed the performance of the economy was broadly in line with what the headline figures suggested.

KBC Bank’s Austin Hughes said the 2.7pc rise may overstate the true rate of growth.

“Our inclination is to allow for a somewhat weaker trend in GDP over the remainder of the year than that seen in the first quarter, reflecting a combination of smaller contribution from net exports and a negative contribution from stock-building,” the bank said.

“As a result, on what we judge to be fairly conservative assumptions, we now think GDP growth will be about 2.5pc in 2014.”

Fiona Hayes of Cantor Fitzgerald said the positive start to the year augered well for growth.

“Irish GDP is prone to unusual quarter-on-quarter volatility and so, while it appears that our 1.6pc GDP projection could be on the light side, we are reluctant to rush to revise it upwards based on one quarter’s figures,” she said.

The revisions were much bigger than many experts predicted and now means that Irish GDP is estimated at €174.8bn