Manufacturing industry had a difficult first half to the year, according to new official figures for trade and production. They show exports running well below last year's levels, while industrial production trends also remained quite weak, writes Cliff Taylor, Economics Editor
The latest figures "confirmed the weak performance of the Irish economy in the first half of the year", according to IBEC's chief economist, Mr David Croughan, who said they showed that industry was struggling to maintain output levels in a very sluggish global economy.
This is reflected in the latest trade figures, published yesterday by the Central Statistics Office (CSO). Exports of €6,480 million were down €175 million on the previous month and continue to run well below last year's levels. Imports of €3.76 billion were up 3 per cent on May, but also remain well below 2002 levels.
The total value of exports in the first half of the year at just over €40 billion was 19.5 per cent down on the same period last year, while imports at €23.3 billion were running 23 per cent below 2002 figures.
Separate figures for the actual volume of exports - which adjust for price changes - show a 15 per cent drop in the first five months of the year, compared with the same period last year. Import volumes, meanwhile, fell by just over 19 per cent over the same period.
As previously reported, the figures for the early months of this year appear to have been seriously affected by the ending of VAT fraud schemes, based in Britain. These schemes involved the moving of electrical goods from Britain to the Republic and back again, designed to illegally pocket VAT payments in the UK market. Their operation inflated Irish export and import volumes for a period up to last year. However, as a number of the schemes were closed, both export and import volumes fell sharply this year.
A note in the CSO trade figures refers to "a very significant fall in the pattern of distributive- type trade in electrical machinery and parts with Britain", which occurred late last year and early this year. Exports to Britain fell by 49 per cent to €5.5 billion in the first six months of the year, while imports from Britain fell by 44 per cent to €5.5 billion. Exports of electrical machinery and parts to all countries fell by 67 per cent from €6.2 billion to €2 billion, while imports in this sector fell by 68 per cent to €1.86 billion.
Estimating precisely how much of the trade decline is due to the ending of the VAT scams is impossible. However, it is possible that it accounts for €2-€3 billion of the €9.5 billion fall in export volumes in the first six months and that it contributed a similar amount to the €7 billion fall in imports over the same period.
As it affected both imports and exports, it is not believed to have had any significant impact on the trade surplus, which is, in turn, the way trade trends feed into overall growth figures. However, the surplus at €16.76 billion in the first six months this year is still well down on the €19.34 billion for the same period last year.
A note on the latest figures from Davy Stockbrokers says the trend may have stopped deteriorating in terms of the fall-off in the value of trade. The brokers point out that the percentage annual drop in both exports (down 8 per cent) and imports (down 12 per cent) last month was the smallest in any month so far this year. Allowing for the VAT fraud impact, Davy believes trade will not have had a significant impact one way or the other on economic growth in the first half of the year.
Meanwhile, separate CSO figures show that manufacturing production in the first six months of the year was 2.9 per cent ahead of the same period last year. However, much of the increase was recorded in the early months of the year and production in June - while it was up on May - was actually slightly lower than the same month last year. Looking at the three-month figures, which the CSO says give a better picture of the trend, production in April to June was 1.5 per cent ahead of the previous three months.
The figures show that production in the "modern" sector - including a number of the high-technology and chemical industries - in the first half of the year was running 3.9 per cent ahead of the same period last year, while production in the indigenous sector showed no change over the same period. For the month of June alone, production in the modern sector was up 0.2 per cent annually, while it fell 1.3 per cent in traditional industry.
The modern sectors have been responsible for the vast bulk of the growth in production in recent years, although the downturn in the IT sector has slowed growth substantially over the past year. Output in the modern sector is now running at about four times its 1995 levels, while the increase in the traditional sector has been just 20 per cent.
In a comment on the figures, Davy said the industry's performance in the Republic was superior to the euro zone as a whole, where annual output rose by just 0.1 per cent in the first half, compared with the 2.9 per cent output increase recorded here.
