Mr. Ian Power:

I will go through the components of GDP starting with consumption. Consumer spending has been quite strong in the first half of this year, up by 3.5%. This has been driven by the very strong performance in goods consumption in particular. As members will see from the graph on the left hand side the high-frequency indicators, such as retail sales and core retail sales which excludes car sales, all show robust growth. Consumer sentiment remains solid and well above its long-run average.

The sale of cars has been very strong in the opening months of this year, supported by a pick-up in medium-term consumer credit growth which can be seen in the panel on the right. This acceleration in credit growth is helping drive the very strong performance we have seen in consumer durables over the past year or so. Car sales are particularly strong in the first quarter, up 30% year-on-year. However, as members can see there has been a bit of a deceleration in the second and third quarters. Overall we expect consumption to remain solid in the latter half of this year and into next year, supported by favourable labour market dynamics and continued increases in personal disposable income.

On investment the most noteworthy development relates to intangibles, with investment in intellectual property assets increasing by almost 20% in the first half of this year. However, it is important to note that the bulk of investment in intangibles is actually imported so the direct impact on GDP is relatively limited.

Encouragingly, building and construction investment recorded double-digit growth in the first half of this year with strong contributions from both residential and commercial construction investment. Slide 14 shows that the commercial vacancy rate in Dublin is now at its lowest level on record. This should also help support commercial construction investment along with the pick-up in public capital expected from 2017 onwards.

On the external side, underlying exports, in other words exports produced in Ireland have remained very strong in the opening half of this year with positive contributions from both goods exports and service exports. However, on a headline basis, export growth has moderated sharply in the first half of this year. As members can see, this is due to contract manufacturing, represented by the green bar in the slide. Contract manufacturing is where a multinational operating in Ireland contracts the production of goods to a third-party firm abroad. If those goods are sold abroad, it is recorded as an Irish export even though the good may never have actually been physically located in Ireland. Last year contract manufacturing was one of the main factors behind the inflated GDP figures, whereas this year contract manufacturing is having a negative contribution on overall export growth and overall GDP growth. We-----