Analysis: Next set of figures will help clarify the State's economic progress, writes Cliff Taylor, Economics Editor

It would be possible to plausibly construct a variety of "spins" on the latest quarterly national accounts. Gross national product in the third quarter of 2003 was running 3.6 per cent ahead of the same period in 2002, for example, leaving the way open for an "Irish economy continues to outperform" story.

Those who like to see the glass half empty might prefer to concentrate on the 0.1 per cent fall in GDP over the same period in 2002, or the 1.3 per cent drop in GDP between the second and third quarters of last year.

A few more quarters of that and we could declare a recession!

Looking at the sum of the figures - and their breakdown by sector and by areas of the economy - the best judgment appears to be that the economy was fairly flat in the third quarter of last year.

There are some tentative signs of recovery, though the jump in GNP recorded in the second quarter was not repeated.

Given that the US recovery only really gathered steam in the third quarter of last year, it is perhaps not surprising that our recovery should lag by a few quarters.

Economists remain relatively upbeat about this year, though growth forecasts remain fairly modest.

The reason why Irish economy figures remain so difficult to interpret relates to the openness of the economy and particularly to the swings of net financial flows in and out.

These relate to the profits of multinationals based here, profits earned overseas by Irish firms and other factors.

This net factor flow category amounts to almost €5 billion a quarter - more than one-fifth the level of quarterly GNP.

This means small swings one way or the other in factor flows can have a significant impact on the figures.

This is particularly evident in the gap between GNP and GDP. Last year multinational profits fell sharply, dramatically cutting the GDP growth rate which was running at 7 per cent plus for most of 2002.

This has led to a greater reliance on GNP as an indicator - as it excludes net factor income flows.

GNP is designed, however, as a measure of "income" earned by the economy, so it is not a perfect measure of economic output either.

Economist Mr Austin Hughes of IIB warns that the "noise" in the GNP/GDP data limit their current usefulness as a barometer of living standards.

And looking at the swings in the graph of the two indicators, it is hard to disagree with this.

That said, if the international recovery is having an impact here, it should certainly be shown in the national accounts data for the fourth quarter of last year and the early part of 2004.