Green shoots start to show in troubled sector

GOVERNMENT ministers like good news these days and Jobs Minister Richard Bruton is no exception.

He has given a strong welcome to the latest NCB Purchasing Managers Index, which showed that growth in manufacturing has hit its second highest level in 11 years.

Mr Bruton said: “A strong export performance will be crucial in driving the recovery in the wider Irish economy. Today’s figures, the latest in a growing body of evidence of high levels of performance in manufacturing and exports, show that there are grounds for hope.”

However, he warned against complacency over the sustained export performance.

Davy Research was optimistic in its analysis of the PMI Index and suggested export-led growth should continue into the second quarter. But it has also urged caution.

It said the update on the country’s EU stability programme, published on April 29, revised down official projections for Irish GDP growth in 2011 to 0.8%.

Those revisions “largely reflect a more pessimistic view of the outlook for domestic demand, specifically consumer spending and investment”.

For that reason the focus will turn to the Irish services PMI release due later this week to see if the more domestic-focused services sector “remains weak going into the second quarter”.

The April data pointed to a positive increase in employment at Irish manufacturing firms, with the rate of job creation described as solid.

According to respondents, the main cause for higher staffing levels was to raise production capacity. Close to 19% of panellists reported employment growth in April.

Recently, some economists have made the point that with the huge tax burdens on us, it is difficult to see any increase in consumer-led demand this year.

At one point during the 1980s, when exports were booming, emigration was also very high because Irish borrowing at the time had gone out of control and cut backs had to be introduced to resolve the fiscal crisis facing the country.

Commenting on the report, NCB chief economist Brian Devine pointed out that manufacturing is largely driven by exports and his concern is that “the euro’s continued rise against sterling and the dollar will be of concern, but to date, demand is outweighing this impact with the new export orders reading at 59.0”.

While the figures show a good performance by domestic- as well as foreign- owned manufactures he said he was still “pessimistic overall” for the economy in 2011.

“I think the economy overall will decline once again in 2011,” he said.

He added that quarter on quarter retail sales fell 2% and the continuing absence of the consumer for the economy remains a key issue.

Also in 2010, GNP fell 2% overall but domestic demand fell 6.5%, reflecting loss of consumer confidence.

Overall the recent retail sales figures show a continuing lack of consumer confidence that “should undermine even the revised growth forecasts,” he said.