Analysts: Strong export growth is slowing down

Irish export and manufacturing growth could take a sizeable hit this year on the back of currency fluctuations and continuing global weakness.

Irish exporters are still set to outperform their European peers in 2016, but new figures have shown a significant decline in industrial production levels.

Preliminary CSO data for March yesterday showed a 12.4% annual fall in manufacturing production levels; starkly widened from a 0.8% year-on-year decline in February.

On a rolling monthly basis, March output levels were down by 12.9%.

Activity in the pharmaceutical and technology areas slowed considerably in the month, with the so-called ‘modern’ sector — which encapsulates such industries — seeing output levels fall by nearly 19% year-on-year and by 13.4% on a monthly basis.

The CSO cited changes in monthly production patterns, pricing, product mixes and stock building/reduction activity as reasons for the change.

Conall Mac Coille, chief economist with Davy Stockbrokers, also pointed to the weakness in global manufacturing and the appreciation of the euro against the dollar and sterling as contributory factors.

However, he also cited the modest 0.8% rise in output from the domestic, or ‘traditional’ sector in the first quarter (up 0.2% year-on-year in March, according to the CSO) as reason to suggest not all is lost.

“On balance, Irish manufacturing and exports still look set to outperform European peers in 2016, but the stellar growth seen in previous years now appears to be slowing,” he said.

The CSO figures came a day after the latest Investec PMI showed the manufacturing slowdown extended into April with the slowest rise in new customer orders for Irish manufactured goods logged in nearly two and a half years and new export orders accounting for much of the sluggishness.

“Manufacturing output has been very strong in the past couple of years, increasing by 24.2% on average in 2014 and 17.4% on average in 2015.

“We expect another solid rise in 2016, although it is now likely to be only around half that of last year,” said Alan McQuaid, economist with Merrion Stockbrokers.

The CSO also yesterday updated on the joblessness picture. Seasonally adjusted figures for April show an unemployment rate of 8.4%, down from 8.6% in March and 9.7% in April of last year. The eurozone average is currently 10.2%.

The average jobless rate for this year is expected to be 8.2%. Employment grew in most sectors, including an 8.5% pick-up in construction.

“Although emigration has been a factor to some degree in keeping unemployment down, the labour market has improved dramatically over the past few years, reflecting the strengthening of the economic recovery,” said Mr McQuaid.


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