Brexit concerns despite export bounce

Preliminary figures published yesterday by the CSO indicate an impressive recovery in Irish export performance in August, suggesting an initial easing in early Brexit concerns.

Provisional data shows a €1.4bn — or 16% — improvement on the month in seasonally adjusted export value, to just under €10.3bn.

Coupled with a 2% dip in import value, this resulted in a 43% monthly jump in Ireland’s trade surplus to over €4.95bn.

In volume terms, August’s 11.7% export rise undid a 10.3% fall in July.

“Business and consumer confidence have been dented to some degree in recent months by the uncertainty surrounding Brexit,” said Alan McQuaid, the chief economist with Merrion Stockbrokers.

“However, the trade data for August and for the year to date have been quite positive.

"Still, the uncertainty over the implications of Britain’s decision to leave the EU, in its June 23 referendum, suggests risks on the external trade front remain elevated over the rest of 2016 and into 2017, especially for food exporters.

“One can only speculate as to how Brexit will impact Ireland ... but there is likely to be a negative impact on trade. While the UK might only account for 16%-17% of Ireland’s total exports, 30% of all employment is in sectors which are heavily related to UK exports.

“SMEs will likely be more affected than larger companies by the introduction of tariffs and barriers to trade. That said, however, whatever about 2017 and beyond, we still think the overall goods surplus this year will be a lot higher than in 2015, at around €46bn.”

The CSO yesterday revised Ireland’s 2015 annual trade surplus from €42.2bn to just under €42.3bn.

“The movement in the currency [sterling] and the risk of a significant slowdown in growth in the UK suggest that exports will make a smaller contribution to Irish growth in the near-term, but domestic demand should continue to drive strong GDP growth of about 3% next year,” said David McNamara of Davy Stockbrokers.

He said that while the August CSO data suggests Ireland’s highest monthly trade surplus on record, it could “unwind” in the near future, given current volatility.

“The sector breakdown showed strong growth in both pharma and non-pharma exports in August,” he said. “Pharma exports are now up 31% year-on-year, but non-pharma exports are now up 4.3% year-on-year.

“More broadly, 2016 has been a challenging year for Irish exporters. Sterling is now down 18% against the euro, year-to-date, squeezing Irish exporters’ margins — particularly in traditional manufacturing sectors reliant on trade with the UK.”