Ireland's' Central Bank in DublinGoogle Images

The Irish government has suffered a major setback in its bid to get the economy back on track – deflation returned in the third quarter of 2011.

New figures from the Central Statistics office confirm that the economy actually shrank dramatically between July and September when Ireland was the worst performing economy in the European Union.

Ireland’s Gross Domestic Product – the combined value of all goods and services produced – fell by 1.9 per cent in the third quarter of 2011.

Gross National Product - the value of all services supplied by Irish residents and considered a more realistic measurement of an economy’s standing - fell by 2.2 per cent.

The Gross Domestic Product drop is the worst in Ireland since the first quarter of 2009 and is stark contrast to the opening six months of 2011. Irish GDP grew by 1.8 per cent in the first quarter and by 1.4 per cent in the second.'

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When the figures are annualised, the Irish economy is growing but only by 0.5 per cent, down significantly on stats from earlier in the year.

Once again the construction industry has fared poorly with output down by over 20 per cent in value while public administration and defence output has also fallen, by four per cent.
Agricultural, forestry and fishing industry output is up by 15 per cent on 2010.

Preliminary data for October shows that Ireland’s trade surplus, the amount by which the value of exports exceeds imports, fell by 11 per cent.

As the economy contracts, Ireland is bottom of the table of EU member states in terms of economic performance for the third quarter of 2011.

Economic growth in the 27 European Union member states fell to an average of 0.3 per cent in the third quarter while growth in the Eurozone stands at just 0.2 per cent.

In contrast, Ireland had the second-highest rate of growth in the second quarter of 2011.

Economists from the Central Statistics Office have warned against reading too much into quarterly changes. They point out that the latest figures were affected by a drop of more than 20% in investment.

The CSO says that on an annual basis, GDP fell by 0.1% and GNP was down 4.2%. Consumer spending and government spending both fell by 1.3% during the third quarter, while investment slumped by 20.9%. Exports increased by 0.8%.

Compared to the previous 12 months, consumer spending and government spending both fell by 3.9% while investment slumped by 22.2%.

For the first nine months of 2011, there was a balance of payments deficit of $895million, compared with a deficit of $1billion in the same period last year.

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