Economists downbeat as manufacturing levels slip 3.6%

Production levels at Ireland’s manufacturing industries fell by 3.6% in February, after two consecutive months of increases.

On a year-on-year basis, February saw a 3.3% drop, broadly in line with economist expectations. The figures were published by the CSO.

February’s monthly fall followed two well-performing months — with December showing a monthly increase of 4.5% in output and January seeing a more marginal 0.8% rise.

Alan McQuaid, the chief economist at Bloxham Stockbrokers, said he had anticipated an annualised drop in production levels of 3.5% for February.

He said the CSO figure did not bode too well for the manufacturing sector, but should not have too much of a negative effect on the country’s export performance this year.

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

Yesterday’s industrial production figures, from the CSO, showed that there was a 0.4% increase in production from the so-called traditional sector during February, but that the more technology and chemical/pharmaceutical-driven “modern” sector saw production fall by nearly 6%.

“Manufacturing output figures can be quite volatile at the best of times, particularly in relation to the chemicals sector, which accounts for half of Irish merchandise exports.

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

Davy Stockbrokers also poured cold water on the latest CSO figures, saying they are “extremely volatile” and “prone to revision”.

“We cannot infer much from changes in production on a month-on-month basis. Annual industrial production grew at double-digit levels in late 2010 and early 2011, as the global economy rebounded from depressed levels in 2009,” said Davy’s chief economist, Conall MacCoille.

“The slowdown through 2011 must, in part, reflect weakening demand in the euro area. We expect Irish exports and industrial growth to slow in 2012, due to the euro area recession.”