Economic recovery picking up momentum

IRELAND is emerging from recession, with encouraging economic signs arriving on an almost daily basis, according to Bloxhams Stockbrokers chief economist Alan McQuaid.

Total industrial output volumes are up 13.7%, while manufacturing volumes are up 15.3% for the three months from January to March 2010. The latest CSO figures also show annual jumps of 3.3% and 3.0% respectively for manufacturing and industrial outputs for the year to March 2010.

“We are over the worst, the numbers are getting better,” said Alan McQuaid. “There is a definite pick-up in the economy. Last week’s Reuters survey of Irish economists showed predictions of GDP growth of +1% for 2010, compared to a -0.6% prediction for the previous poll in March.

“We are in a better position than most. The decision to go ahead with the Government bond auction from the NTMA next Tuesday is another vote of confidence.

“The omens for the overall manufacturing sector look good, with the latest Purchasing Managers index for April showing a second successive positive reading above the ‘neutral’ 50 level. March was the first time in 28 months that the Manufacturing PMI pointed to growth in the sector.”

Yesterday’s CSO figures also showed manufacturing output in the first quarter of 2010 up 6.9% on average on the same period last year, while total production was 5.9% higher.

Irish manufacturing output is projected to increase by over 5% in volume terms in 2010. Encouragingly, the ‘traditional’ sector looks set to make a positive contribution as the year goes on, reaping the benefits of stronger sterling and the significant cost adjustments made by the Government over the past 12 months or so.

However, the positive signs are still highly dependent on a strengthening of sterling and a gradual emergence from the present debt crisis.

“If the debt crisis goes on for much longer, it will scupper the recovery,” said Alan McQuaid.

“Sterling is critical to the indigenous side, with two-thirds of our exports still going to the UK. We still think that tighter fiscal policy, irrespective of who takes office, combined with the ongoing uncertainty regarding eurozone ‘peripheral’ government debt, will see sterling rally versus the euro in the coming months.

“We are still looking for the pound to appreciate to 80p by year-end, which would be a welcome development for Ireland’s indigenous sector. Given the pick-up in global demand anticipated this year and the consequent positive outlook for exports, the signs are positive. In overall terms, the figures for 2009 weren’t too bad all things considered.”