Ireland’s economic performance during the first three months of the year was marked by a strong export performance but continuing weakness in domestic demand, according to new figures from the Central Statistics Office.

Economic output - as measured by gross domestic product (GDP) - grew by 1.3 per cent in the first quarter compared to the final quarter of 2010. But another measure of output - gross national product (GNP) - fell by 4.3 per cent.

The GDP growth is the largest quarterly rise since the end of 2007. Irish exports in the first quarter were at a record high. Official revisions mean Ireland's economy shrank 0.4 per cent, as measured by GDP, last year.

That was a much better out-turn than the preliminary estimate of an annual fall of 1 per cent released in March but still the second worst performance in the euro zone after Greece.

Minister for Finance Michael Noonan described the data from the CSO as very encouraging after three consecutive years in which the economy had declined. He said the figures were consistent with Department of Finance figures which indicate growth in 2011.

Mr Noonan acknowledged the domestic economy was flat but said he believed the Government's jobs initiative would help lift growth rates during the year.

Economists cautioned that the jump during the first quarter from a revised drop of 1.4 per cent the previous quarter was more to do with external demand than any recovery at home. Consumer demand dropped 1.9 per cent in the quarter, the worst in two years.

"Overall the numbers continue to indicate that we're bouncing along the bottom. There's no real signs of growth in the economy overall in the short term because of the drag of domestic demand," said Dermot O'Leary, economist with Goodbody Stockbrokers.

"We've an economy which is going to be flat this year, GDP could be slightly up and GNP slightly down. I think the government are too optimistic," he added.

GDP is an international method of calculating growth and decline. In Ireland’s case, forecasters prefer to focus on GNP because it excludes multinational profits. The figures show that GDP rose by 0.1 per cent compared to the same quarter a year earlier, while GNP was 0.9 per cent lower.

Business lobby group Ibec said there were many positives in the latest figures but warned of the need to do more to boost domestic demand.

"Despite the stellar export performance and the recovery in investment, overall economic growth remains fairly flat because consumers remain too frightened to spend. Government must do everything it can to give households clarity on the economic situation and in particular it must clearly spell out as early as possible the likely impact of the budgetary adjustments on household finances," said Ibec chief economist Fergal O'Brien.

"If Irish consumers start spending again a solid period of economic growth could quickly emerge," he added.

Ictu said fall in domestic demand showed Ireland had reached "the limits of austerity" and called for new measures to be introduced to inject new life into the economy.

"The austerity programme is crippling the domestic economy. It is choking off demand, closing businesses and costing us jobs. Even the most ideological of zealots must now concede that the programme is self-defeating as it is killing that which it purports to try and save," said Ictu economic advisor Paul Sweeney.

A breakdown of the data show net exports grew by 20.6 per cent or €1.557 billion over the year while domestic demand declined by 3.1 per cent or €990 million with personal consumption down by 2.9 per cent.

Exports were up 3.8 per cent when compared to the final quarter of 2010 while personal consumption and Government expenditure both fell by 1.9 per cent. Imports fell by 0.3 per cent over the same period.

Related figures issued by CSO show GDP fell by 0.4 per cent in constant prices between 2009 and 2010 in line with previously published quarterly estimates.

However, GNP rose 0.3 per cent over the same period, compared with a previously signalled 2.1 per cent decline.

The data shows industry (excluding construction related business) grew by 11.2 per cent over the year under review while agriculture, forestry and fishing rose marginally by 0.7 per cent.

These gains were not sufficient to counteract the declines recorded across the remaining sectors of the economy.

Building and construction activity was the biggest faller, declining by 30.1 per cent from 2009 to 2010.