This growth was driven by a combination of strong exports and domestic demand but was accompanied by increasing signs of overheating. The Bulletin reports that the outlook for this year is for a slowing in output growth, to about 7 per cent. This figure is likely to be revised downward, however, following recent international developments and the impact of foot and mouth disease. There is a risk of a significant deceleration in exports generally which would leave export volume growth at about 11 per cent for 2001, down from an estimate of close to 20 per cent for last year. The slowdown in the US economy could prove to be protracted and may impact significantly on investment and activity in the high technology manufacturing sectors in Ireland.
Domestic demand is likely to remain robust in the short term.
Investment is also likely to remain strong but supply-side constraints may limit the extent to which previous growth rates can be sustained in the construction sector. The labour market is likely to continue to tighten with further employment growth of about 3 per cent in prospect, down from 4 per cent last year. Underlying services inflation averaged close to 7 per cent last year, up from 5 per cent in the previous year. This higher rate of services inflation reflected a combination of strong domestic demand and accelerating wage pressures. Some temporary factors that boosted headline inflation last year are likely to have the opposite effect in 2001.