New ESRI Research Highlights the Need for Timely Estimates of Irish GNP and GDP

Adoption of modern “nowcasting” approach could assist our policy process  

A Research Note, published today (Monday, 6th October) by the ESRI, illustrates the use of a new forecasting tool, “nowcasting”, to produce more timely estimates of both GDP and GNP for the Irish economy. The Quarterly National Accounts released by the Central Statistics Office (CSO) provide the most comprehensive estimates of Irish economic activity. However, significant issues arise with regard to the timeliness of these data, with official estimates of growth in a quarter typically only available 90 days after the quarter in question. The modern “nowcasting” approach applied in this Note addresses this issue by providing an accurate and timely early indicator of quarterly growth which can inform policymakers and officials.   The approach uses a large number of relevant, high-frequency, macroeconomic indicators, such as Industrial Production, Retail Sales and Trade, to generate early estimates of economic performance. Commenting on the Note, David Byrne, one of the authors, said “Today’s Note shows that using the nowcasting approach could have provided evidence that significant growth was emerging in the second quarter of 2014, months in advance of the release of the official figures from the CSO. The estimate for quarter 3 implies that growth has continued during this quarter.” David Byrne continued, "By international standards, Irish quarterly GDP is very volatile and open to significant revisions which can have implications for both economic forecasters and policy-makers.  The value of the nowcasting approach is that it can provide evidence of significant changes in economic activity in advance of official estimates and therefore, can be an important tool in assessing the performance of the Irish economy.” "Given the importance of GNP in an Irish context, the nowcasting methodology has also been expanded to include this indicator with a nowcast of 2.4 per cent quarter-on-quarter growth in GNP for the third quarter of 2014.”  

Notes for Editors 1.     This article is a Research Note in the Quarterly Economic Commentary, Autumn 2014, to be published on October 8 2014.