Fall in output from Irish factories focuses debate on outlook

Output from Irish factories fell in November from October as production from the so-called modern sector, comprising mostly large multinational firms, fell for the first time in six months.

The CSO figures showed, however, that output from the modern sector remains 14% higher in the year, while output from the traditional sector, which tends to be more labour-intensive, rose in the month and posted a near 8% rise in the year.

The figures have sparked a debate about when the huge beneficial factors driving industrial output will start to wane.

The exceptional drop in the euro against the dollar and sterling has made exporting to Ireland’s largest markets in Britain and the US much more competitive at a time when their economies are expanding.

Concerns over world economic growth and stock markets in China have dominated the start of the year.

“Surveys suggest plenty of momentum left in the sector at the turn of the year, with demand from Ireland’s main trading partners remaining strong, although the tailwinds from a weaker euro should eventually fade,” said Davy Stockbrokers economist David McNamara.

“Industrial production growth should therefore begin to moderate from the exceptional gains seen in 2015,” he said.

Overall, output from all sectors, which fell 0.6% in the month, was 3.8% higher over the latest three-month period and was 11.3% higher in the year.

“Although there remain concerns about the underlying health of the global economy, particularly China, we think overall growth will hold up this year,” said Alan McQuaid, chief economist at Merrion Capital.