Boost for Irish factories amid mixed indicators for health of economy         

There are mixed indicators for the outlook of the economy amid the cost-of-living crisis.

Irish-owned factories fared well in recent months, with output increasing despite the cost-of-living crisis, but the Irish-based multinationals dominated by pharma and the tech giants appear to have faltered, new official figures show.

The Central Statistics Office data is the latest to suggest mixed signals about the outlook for the Irish economy as, along with the rest of Europe, it faces the most uncertain outlook since the banking and property market crash 14 years ago.

The new figures show that industrial output from the so-called traditional sector climbed by 14.6% in the three months to the end of June from a year earlier, with food production also increasing.

However, the ‘modern sector’ that is dominated by the multinationals fell by over 7% in the same period, the figures show.

Multinationals played a huge role in insulating the State from the economic fallout of the worst of the Covid-19 crisis of the past two years. Exports of pharma, IT, and chemical multinational firms boomed during the crisis and, as their profits climbed, the amounts they paid to the Irish exchequer in corporation tax rose to a record high.

The recovery of the traditional sector will be welcomed but questions will be raised about how the Irish-owned firms which employ many thousands of workers will fare as the inflation crisis continues to affect domestic firms which are more vulnerable than the multinationals to soaring energy costs.

The range of indicators and hard data continue to be mixed.

Exchequer returns

The exchequer returns last week for July showed that Government revenues continued to soar, in one of the best indicators for the health of the economy because the data for income, Vat, and corporation tax receipts are the most timely signs of the health of the economy.

Surveys of consumers are less upbeat, however.

AIB said yesterday overall sales on its cards posted a fall of 1% in the quarter to the end of June compared to a year earlier, and that spending could be affected as inflation bites.

“While the data shows some positive elements, it also suggests an element of caution among consumers, given the current inflationary environment, which will likely have an impact on the discretionary spending power and attitudes of consumers as we look forward to the third quarter,” the bank said.

Many Irish and international economists forecast that the economy here will avoid a recession, as long as Russia doesn’t turn off the gas to the EU this winter.

Grain shipments

Meanwhile, the resumption of grain shipments from Ukraine will help rein in global food inflation, but other challenges remain.

Bloomberg reported crop prices on futures markets have retreated to pre-war levels, and the UN’s monthly measure of food prices sank the most since 2008.

That is offering some relief to consumers who have faced rampant food inflation since the start of the pandemic.

Still, the war is putting more pressure on farmers from the US to India to replace crop losses and shipments from Ukraine — a key supplier to poorer nations.