Job losses trend set to continue

AS the manufacturing sector struggles, due to a loss of competitiveness and the global economic slowdown, a senior economist with NCB has warned that job losses will continue.

“The reality is we are moving from a low-cost to a high-cost economy and there is an inevitability about the current losses,” Eunan King said.

However, he is upbeat about the long-term outlook for the economy.

Rejecting the latest figures on economic growth, Mr King argued it was implausible that GDP grew by just 0.5% in the first quarter of this year. It defies economic logic that, having achieved GDP growth of over 7% in each of the previous three quarters, that economic output was up by such a marginal figure, he said.

Bank of Ireland’s chief economist Dan Mclaughlin says the GDP figure will be impacted by the significant dip in exports.

“I forecast GDP of 6.9% last year and I was right, but the export figures suggest GDP of 2.5% for 2003 and I see no way around that.”

Mr King drew a distinction between yesterday’s disappointing purchasing managers index poll (PMI) and the outlook for the year as a whole. The US is showing clear signs of picking up and Ireland will benefit from that shift in sentiment, he said.

As a result of the change in the US, NCB is forecasting GDP of 4.75%. This is marginally below the growth it forecast for the economy back in 1998, which is well ahead of the general average forecast on GDP from other key analysts at this stage.

NCB’s purchasing managers index shows that in July, the index stayed below the 50 no change mark for the 10th consecutive month.

It stood at 45.8 in July, a modest increase from the June low of 45.7, suggesting the deterioration eased marginally.

On that front Mr King sees the sector moving to a more even keel in the coming months.

“The decline in the manufacturing sector appears to have stabilised this month,” he said.

“There are some slight grounds for optimism in the less rapid deterioration in export orders and employment,” he said.

The latest NCB report on manufacturing has signalled a further deterioration in Irish manufacturing business in July.

As the sector stayed weak, stocks of raw materials continued to fall, as firms cut capacity in response to the ongoing shake out in manufacturing.

Employment levels in the sector fell for the 11th month in a row, but the shedding eased back to its lowest level since April, despite closures in recent weeks.