The economy grew faster than many expected last year, expanding by 0.9 per cent in GDP terms, but recovery remains very tentative, according to the newest economic figures from the Central Statistics Office.

The data shows that despite the annual growth, GDP was flat the final three months of 2012, while growth figures for the third quarter were revised downwards. Technically, this meant the economy was back in recession as the year turned, although some bright spots within the numbers point to a more nuanced and, ultimately, more positive picture.

Domestic demand
The out-turn for consumer spending was one such encouraging aspect, with quarterly growth of 1 per cent on a seasonally adjusted basis the strongest such outcome all year. Domestic demand as a whole was up by 0.5 per cent in the year to the final quarter, suggesting that domestic economic activity may be moving more freely than in recent years.

This came as exports recorded a sluggish year, with annual growth of 2.9 per cent comparing to expansion of 5.1 per cent in 2011 and 6.2 per cent in 2010. Some commentators now identify a “rebalancing” in the economy, as slightly improved employment numbers trickle through into more robust consumer behaviour, helping to offset slower export growth.

Ibec, the employers’ group, said that the domestic sector is now contributing positively to growth for the first time since 2007, with chief economist Fergal O’Brien noting that the economy performed “relatively well” in 2012, despite external pressures.

He described 2012 as “a year of two halves”, with good export growth in the first six months followed by a slowdown in the second six months as the euro zone economy faltered. Overall, he said, the numbers indicate that the domestic economy is “gaining momentum”.

'Underlying picture'
Conall Mac Coille, chief economist at Davy, saw "a mixed picture" in the data.

“The underlying picture is that the export sector is slowing sharply as the domestic economy continues to stabilise,” he wrote in a note.

Emmet Gaffney at NCB warned that GDP figures were "inherently volatile", but noted that the underlying trend in the economy "remains intact".