Production rises 10% in August

INDUSTRIAL production in August was up 10.4% compared with the same month last year, with the rise in the volume of output led by pharmaceutical output.

That sector recorded an increase of 18.5%, while production in the modern sector – that takes in both the chemical and technological sectors – showed a 14.6% annual rise in August. By comparison traditional manufacturing rose 2.2% year on year.

In the quarter to end August production was 3.9% higher than in the March to May figures, figures released yesterday by the Central Statistics Office show.

Bloxham chief economist Alan McQuaid said the bottom line is that external demand will be key to how Irish manufacturers perform in the coming months.

“The weakening global economy will clearly have an adverse impact on output/exports. That said, Irish manufacturers are benefiting from improved competitiveness, with the lowering of the cost base arising from the decline in wages and prices across the economy expected to place Ireland in a very favourable position to benefit from the eventual recovery in trade flows.

“However, the expected rebound in output/exports may be held back somewhat by sector-specific effects. For instance, the chemicals sector, which accounts for around half of overall Irish merchandise exports, is expected to face somewhat limited upside potential amid the recovery in world trade in view of the slightly cyclical nature of demand for its output,” he added.

Meanwhile, French industry recorded zero growth in output levels in August, suggesting that production activity in the euro region’s second-largest economy had stagnated. Economists had forecast a 0.3% increase.

Commenting on the French outturn, Sebastian Wanke, an economist at Dekabank in Frankfurt, said “the entire euro region will expand at a weaker pace in the second half than in the previous six months.

“The French situation is still relatively robust. We’ll see weaker growth rates, but it’s more of a normalisation,” he told Bloomberg.

The dip in French output follows last Thursday’s warning by ECB president Jean-Claude Trichet that currency instability could undermine economic stability on global markets.

Trichet’s comments came after the ECB left its key refinancing rate at 1% for the 17th consecutive month.

The worry is that the euro’s rapid appreciation will curb the competitiveness of European exports, with sharp movements more difficult for companies to adjust to.

The fall in the value of the euro in the first half of the year, when the Government debt crisis exploded, has been credited with boosting growth.

In the second quarter, the eurozone grew at a quarterly rate of 1%.

Mr Trichet said the recovery should “proceed at a moderate pace in the second half of this year with the underlying momentum remaining positive.”