Manufacturing output rises 5.3%

First-quarter GDP figures should see a positive contribution from the manufacturing sector, with latest CSO data showing a 5.3% increase in industrial production levels in February, both in monthly and year-on-year terms.

While manufacturing growth is still likely to be heavily reliant on the multinational high-tech/ pharma-driven ‘modern’ sector — which showed monthly production growth of 5.5% in February — production in the domestic economy, or ‘traditional’ sector, was also up by 3.2% in the month.

Furthermore, growing demand for Irish goods from overseas markets is expected in the coming months.

“The patents issue, related to the pharmaceuticals sector, is likely to remain a negative factor for some time to come; though against that, demand from the eurozone and the UK for Irish goods should start to pick up now, as these economies recover,” said Alan McQuaid, chief economist with Merrion Stockbrokers.

He added: “Whatever about the near-term outlook, we still firmly believe that when the world economy regains momentum, Ireland is better placed than most to take advantage of that; and the signs are encouraging on this front.”

Merrion is optimistic that — after successive annual declines of 1% and 2.2% in manufacturing production — 2014 should see “a modest single-digit increase” posted.

According to David McNamara of Davy Stockbrokers, yesterday’s data means that industry should add to GDP growth for the first quarter of this year, following a sharp decline in the final three months of 2013.

“The fourth quarter decline was entirely driven by the pharmaceuticals- dominated modern sector, with output down 4.8%, compared to a 0.1% rise in the labour-intensive traditional sector.

Nevertheless, we cannot discount another dip in pharmaceutical output in March, affecting the final first-quarter outturn,” he said.

“However, the key point is that the patent cliff has had little impact on employment in industry — up by 2.7% year-on-year — or on the real economy, while the traditional sector is strengthening in line with the eurozone recovery,” Mr McNamara added.