These numbers suggest that, for 2020 as a whole, Irish GDP will be solidly positive. KBC has revised its estimate to an increase in the region of 2.5%. Such an outturn seems to point towards an Irish economy that is very different both in terms of structure and strength at present to that suggested by double digit GDP declines widely feared through the Spring and Summer.

However, GDP data does not reflect the circumstances faced by most households and businesses because of the exceptional nature of the multinational sector and the particular importance of Pharma and ICT, two sectors where demand has been underpinned rather than undermined by the pandemic.

While exports grew an impressive 5.7% q/q, the improvement in third quarter GDP is principally a reflection of a rebound in domestic demand as households and domestic facing firms responded to the re-opening of the economy from health related restrictions.

In this context, KBC states Irish consumer spending increased 21.3% q/q  a notably sharper bounce than seen elsewhere (UK +18.3%, Germany +10.8%, US +9.9%). This reflects both the forced nature of pull-back in spending earlier in the year and fiscal income supports. That said, Irish consumer spend in Q3 remained 5.5% below its Q4 2019 level, a larger shortfall than in the US or Germany but notably better than its UK counterpart.

Similarly, Irish construction spending posted a striking 40.1% q/q increase but still remains 13.3% below its Q1 level. The risk that such shortfalls in domestic activity become permanent ‘scars’ that weigh on employment prospects is the reason that through this year we have married relatively upbeat forecasts for GDP with calls for substantial fiscal support.