Tight Labour Market Points to Robust Activity in First Quarter

Fourth Quarter Results Point to Uplift in Economy

The national accounts for the fourth quarter were published a couple of weeks ago. GDP jumped 3.6% on the third quarter of 2024, seasonally adjusted, and 9.2% on the fourth quarter of 2023. These impressive numbers made up for a poor first three quarters of the year and resulted in a net increase for 2024 of 1.2% on 2023. Modified Domestic Demand (MDD), a measure of domestic economic activity, had a marginally better year and ended 2.6% higher than in 2023 though with signs of a slow down in the last quarter.

So far in the first quarter of this year, the index of industrial production in January is down 3.4% on December 2024 with both the traditional and modern sectors recording declines. Overall, 2024 was a year to forget with the overall index down 6% lead by a decline of 7% in the modern sector. Services, on the other hand enjoyed a good 2024. Production expanded throughout the year and finished with an annual gain of 10%. But the pace tailed off in the fourth quarter and in January 2025 the index was only marginally higher than in December 2024.

The fourth graph shows unemployment in absolute and percentage terms and points in a different direction. The two measures are obviously closely aligned. At the end of last year there was a slight uptick in both seasonally adjusted indices. But this was followed by a steep fall in January which continued into February. The rate of unemployment is now 2.8%. This breaks the record as the lowest rate ever recorded (which was in January!). Even at the peak of the Celtic Tiger boom rates of unemployment did not come below 3%. The figures are indicative of strong – indeed too strong – economic activity in the first months of 2025.

The final current indicator is the AIB survey of purchasing managers which is available for February. Anything above zero in this presentation represents an increase and it can be seen that services have been doing very well in most of 2024, though while still positive, with a bit of a drop in December and January. Manufacturing has not been so buoyant in 2024, but in January the index moved into positive territory and this moved higher in February. The figures tend to confirm the judgement that the year started well for the economy.