Hi-tech sector growth gives manufacturing output a welcome boost

The manufacturing sector grew in April compared with the previous month with most of the increase coming from the “modern” hi-tech sectors.

Production increased by 3.2% compared with March of this year and 1.2% compared with Apr 2012. Manufacturing output for the first quarter of 2013 was 0.6% higher than the last quarter of last year.

“Manufacturing accounts for about a quarter of Ireland’s gross domestic product. With weakened demand from abroad hitting goods exports particularly hard, Ireland has become increasingly reliant on its services industry,” Merrion Stockbroker economist Alan McQuaid said.

The “modern” sector comprises hi-tech as well as chemicals, which showed a monthly increase of 7.8% in April.

However, the traditional sectors posted a much more anaemic 0.2% for the same period.

Figures released last Friday show the pace of decline in manufacturing output across the eurozone is stabilising.

The prospects for the region remain subdued as governments pursue fiscal consolidation policies and banks continue to deleverage, which is constraining the flow of credit to businesses.

“Manufacturing growth in the short-term is expected to be primarily driven by industries under the ‘modern’ umbrella.

Given the still uncertain global economic backdrop, especially in the eurozone and UK, the worry is that overall production will remain subdued in the immediate future, which doesn’t augur well for the prospects of Irish merchandise exports, an integral part of the country’s economic recovery hopes,” said Mr McQuaid.

“But, whatever about the short-term, we believe that when the world economy regains momentum, Ireland is better placed than most to take advantage of that.

“On the basis that world demand picks up as this year goes on, we think Irish manufacturing output will post an overall modest single digit volume increase in 2013 following a decline of 2.8% in 2012.”