The problems facing the Irish export sector have expanded beyond the pharmaceutical patent cliff according to Davy’s stockbrokers’ analysis of the latest industrial production figures.
Davy’s chief economist Conall MacCoille said the massive decline in output from the modern sector in the last three months of last year was as a result of weak global demand for high-end exports.
“Output in the modern sector is contracting very sharply. Modern sector output fell by an enormous 8.8% in Q4 2012. In part this decline reflects a 6.8% drop in chemicals and pharmaceutical output in Q4. But the data now show a 7.3% fall in computers and optical equipment, and a sharp 11.1% fall in other manufacturing. So weak demand conditions, and not only the impact of the pharmaceutical patent cliff, may explain the fall in modern sector output,” he said.
The industrial production figures for Jan 2013 showed that manufacturing output is continuing to decline in 2013 with total industrial production falling by nearly 2% in January compared to Dec 2012, and down 3.1% compared to Jan 2012.
Companies in the production of high-technology goods and chemicals and pharmaceutical products (modern sector) experienced a 0.5% decline in output.
Companies involved in all other areas of manufacturing and production saw a decrease of 2.5% in production on average.
Merrion Stockbrokers’ economist Alan McQuaid said that the fall in output from the traditional sector was as a result of the fall in the value of sterling.
“The ‘traditional’ or indigenous sector fell 2.5% in the month but was up 0.3% in the year in January, only the second increase in the past six months.
“The general weakness in the UK economy as well as the recent sharp depreciation of sterling have impacted negatively on the ‘traditional’ sector in recent months,” he said.
Both Merrion and Davys agree that the fall in output from the modern sector could have negative effects on Ireland’s growth figures.
The Government has continued to pin its hopes on an export-led recovery, relying on increasing Irish exports to help improve gross domestic product figures.
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