“Uncertainty on Brexit, the depreciation of sterling against the euro and weaker global demand appear to be holding Irish manufacturers,” Davy Stockbrokers’ chief economist Conall Mac Coille noted yesterday.
However, Mr Mac Coille said the recovery in the domestic economy can keep Ireland’s GDP growth above or close to 3% this year and next.
He was reacting to latest CSO figures showing a provisional 8.2% monthly rise in manufacturing production in June, but a 0.4% year-on-year decline.
“The slowdown in Irish industrial production cannot be entirely dismissed as another statistical mirage,” he said. “Traditional sector output has contracted by 0.4% in the first half of 2016. This is a significant slowdown from the 4.4% expansion in 2015. The labour- intensive traditional sector accounts for two-thirds of employment in Irish industry.
“We knew goods exports — excluding pharmaceuticals — grew by just 2.1% in the first five months of 2015 following the 16% rise last year. Similarly, Ireland’s manufacturing PMI fell to just 50.2 in July, barely above the 50 no-change level.”
Davy suggests all that means manufacturing and exports will make a smaller contribution to GDP growth this year, placing the onus on the domestic recovery. However, it is upbeat regarding recent services and construction sector indices.
“Despite weaker trends in manufacturing, the rebound in domestic demand should ensure Ireland’s GDP growth remains above or close to 3% through 2016 and 2017,” said Mr Mac Coille.