Sharp fall in manufacturing sector

Manufacturing output has fallen sharply in the last three months, according to new figures released by the CSO yesterday.

The seasonally-adjusted volume of total industrial output for the three-month period of November to January is down 7.4% compared to the preceding three month period.

Chief economist with Bloxhams stockbrokers, Alan McQuaid, said that the decline in output would slow any export-led Irish recovery.

“The worry is though that with production weakening in the latter part of 2011, there will be a negative carryover into 2012, which doesn’t augur well for the prospects of Irish exports in the near-term, an integral part of Ireland’s economic recovery hopes,” said Mr McQuaid.

“That said, industrial production figures can be quite volatile, particularly in relation to the chemicals sector, which accounts for half of Irish merchandise exports.”

The modern sector of Irish manufacturing, including pharmaceuticals and technology, experienced record growth. However, the food and beverage industry is in decline, according to Mr McQuaid.

Modern manufacturing showed a year-on-year rise in production for January of 4.1%, following annual falls of 5.7% and 7.7% in December and November respectively.

Traditional manufacturing fell 8.2% year-on-year, the fifth annual decline in a row and the seventh in the past eight months.

Despite the mixed results Mr McQuaid was relatively upbeat about the prospects for the Irish economy to have an export-led recovery.

“While the omens don’t look particularly good on the manufacturing front at this point in time, Ireland’s focus on relatively recession- hardy exports such as pharmaceuticals and its improving competitiveness should help it weather the storm better than most.

“With domestic demand so weak, it is in our view vital for the economy that the manufacturing sector remains healthy and competitive. Whatever about the near-term, we continue to believe that when the world economy regains momentum, Ireland is better placed than most to take advantage of that,” he said.