Ireland's domestic economy grew for the first time in a year on a quarter-on-quarter basis between April and June, expanding by a 1.0% due to a further increase in spending on services, Central Statistics Office data showed on Friday.

With Ireland's large multinational sector often distorting gross domestic product (GDP) data, officials prefer to use modified domestic demand to gauge the strength of the economy.

The readings for the previous two quarters were each revised down to -0.2%, indicating a short technical recession earlier this year.

Modified domestic demand, which strips out some of the ways multinational activity can inflate activity, still grew 9.5% in 2022 as a whole due to a bumper first half. That was faster than gross domestic product (GDP) growth in any euro zone economy.

The renewed growth in the second quarter was driven by further growth in spending on services, which at 1.2% pushed personal spending on both goods and services up 0.9% quarter-on-quarter from April to June.

Renewed post-pandemic foreign travel and public transport use boosted service expenditure over the last year, the CSO said.

Finance Minister Michael McGrath described the data as encouraging and said the rise in consumer spending reflected the recent easing in inflationary pressures, government support for households and near record low unemployment of 4.1%.

"While today’s data confirm continued growth in the domestic economy, I am conscious of several headwinds. Our economy is clearly operating at full-employment and capacity constraints, in both our housing and labour markets, are increasingly binding," McGrath said in a statement.

"Externally, growth is slowing in some of our main trading partners, and this could have knock-on implications for Irish exports."

The finance ministry expected modified domestic demand growth of 2.1% this year.

Friday's data showed that with exports down sharply and investment markedly higher, GDP grew by 0.5% quarter-on-quarter versus an initial estimate of +3.3%. That followed a decline of 2.6% from January to March. (Reporting by Padraic Halpin; Editing by Kim Coghill)