Signs of Recovery From Decline in April

Preliminary estimates of GDP in the first quarter of the year confirms that growth was brisk. The data show a rise in volume of 10.6% compared with the fourth quarter of 2024 and a 21.1% increase compared with the first quarter of 2024. (This massive increase was enough to push up the estimate of EU growth in the first quarter and to attract unwelcome attention to Ireland’s tax regime in the Economist magazine). The surge was due to the modern sector and specifically exports to the US accelerated in the first quarter to get into the US before the Trump tariffs cut in.

Modified Domestic Demand, which strips out the effects of the multinationals was subdued. In the first quarter it was slightly down on the preceding quarter and only up 1% compared with the first quarter of 2024.

The decline in industrial activity in April, which followed the surge in the first quarter due to the stampede to beat US tariffs, has been reversed to some extent in May. The overall index of industrial production rose 17.4% almost wiping out the decline in April. The index in the second quarter is therefore running at about the same average as in the first, giving some hope that GDP in the second quarter might hold up reasonably well.

Services followed the same pattern as industry – powered by the modern information services sector. After a good year in 2024 services continued to expand briskly and production was running well ahead of 2024 levels in the first quarter of this year. In April, the downturn visible in GDP and industrial production manifested itself in services too but to a less marked extent and in May, service production picked up again. Overall, in the first five months of the year services production was about 23% higher than in the same period in 2024.

The driving factor behind growth and decline and then recovery in industrial production (and services) in the first five months of 2025 has been exports as seen in the Trade graph opposite. The volume of exports in the first quarter was 46% higher than in the previous quarter and 64% higher than in the first quarter of last year. In April, with the US tariff deadline past, the volume of trade declined dramatically but recovered somewhat in May. As in the case of industrial production, the volume of exports in April and May is about the same as the average of January to March.

The AIB Purchasing Managers Index showed a slight dip in July for manufacturing. Nevertheless the trend has been strong since the first quarter suggesting that activity has been well maintained after the surge in the first few months of the year due to anticipation of the trump tariffs. On the other hand services, though still expanding, have seen a continuation in the decline of activity visible since the start of the year.

The final graph shows unemployment in absolute and percentage terms. The two measures are obviously closely aligned. At the end of last year there was a slight uptick in both seasonally adjusted indices and this continued into January. But the latest figures shows unemployment falling in April and May and holding steady in June. Again, the indication is that a high rate of economic activity is being maintained into the second quarter. At 4% of the labour force aged 15-75, the level of unemployment is lower than any time since the boom before the financial crash.