Economic growth disappoints

Economic growth in the last quarter of 2011 was much lower than most forecasters expected.

GDP grew 0.3% for the three months to 31 December, taking annual growth to 1.4%.

The average market forecast was for a 0.6% rise in the quarter.

Manufacturing was the main "drag" on activity, with a 2.5% drop, mostly due to a decline in primary food manufacturing.

The manufacturing sector was always going to be the main driver of any shortfall, due to large over-stocking of inventories in the previous two quarters, and the only question was how large a drag it would be.

The other main "drag" was the impact of the government's new-found fiscal restraint. The GDP figures record a 2.3% drop in government administration and defence, largely due to a drop in hours worked and total remuneration paid to public sector employees. General government expenditure for the year is up, by 1.8%, but slowing towards the end of the year. By way of comparison, the previous year saw a 3.4% increase in government spending.

On the upside, unusually good growth conditions boosted agricultural output and the Rugby World Cup boosted retail and hospitality industry sales.

The primary sector recorded its largest quarterly growth for four years, with a 2.7% increase in output, driven mostly by a 3.5% rise in milk production. Fishing, forestry and mining also rose, by 1.3%, due mostly to a 2.7% rise in mining activity.

The pick up in mining activity is particularly significant as the figures also show a 4.5% rise in investment in "intangibles" over the quarter, mostly due to mineral exploration activity.

The retail sector recorded its highest quarterly level ever, mostly due to Rugby World Cup-related activity. Retail, accommodation and restaurant activity rose 2.2% for the quarter, following a 2.6% rise the previous quarter.

Activity in the finance, insurance and business services sectors was up 1.3%, mostly due to a 2.4% increase in business services, but also because of a 1.9% rise in finance and insurance services, taking activity in this sector to the highest level since the series began in 1987.

For the year, the GDP figures show a 6.9% rise in business investment mostly due to a 13.8% rise in investment in plant and machinery.