Unemployment at All Time Low Suggests Activity Picked up at Start of New Year

Third Quarter Indicators of Macro Trends

The third quarter national accounts were published in December and confirm a sharp jump in GDP on the second quarter. Overall, GDP was up 3.5% in the third quarter compared with the second which itself was revised up 0.5%. The third quarter was 2.5% up on the same quarter in 2023 but overall GDP in the first nine months of the year was 1.6% lower than the first nine months of 2023.

Modified Domestic Demand (MDD), a measure of domestic economic activity, fell in the third quarter and has fallen in each of the preceding two quarters. It is now about 2% lower in the first nine months of this year compared to 2023.

Turning to the fourth quarter, the available information on industrial production in this period is for up to December. That month showed quite a jump in both traditional and modern sectors. This means that for the fourth quarter was slightly up on the third quarter, seasonally adjusted and about 5% up on the fourth quarter of 2023. This is encouraging for the future. Nonetheless, for the year as a whole, industrial production was marginally lower than in 2023 with the traditional sector growing strongly and the modern sector weak.

Services, on the other hand have enjoyed a good year. Production expanded throughout the year though December saw a sharp drop in the rate of expansion and the fourth quarter advanced only 2.5% on the third quarter, though for the year as a whole services production rose 10%.

The fourth graph shows unemployment in absolute and percentage terms. The two measures are obviously closely aligned. At the end of last year there was as light uptick in both seasonally adjusted indices. But this was followed by a steep fall in January. The rate of unemployment is now 2.9% . This is the lowest rate ever recorded – even at the peak of the Celtic Tiger boom. It is indicative of strong surge of activity in January.

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