Irish and eurozone trade weakening further

Ireland is still expected to turn a record trade surplus this year, despite latest preliminary data from the CSO showing export performance beginning to wane even before last month’s Brexit vote.

Ending a week during which it was criticised and ridiculed for heavily-skewed GDP revisions, the CSO yesterday published seasonally-adjusted trade figures for May; showing a 1% — or €99m — month-on-month decline in Irish export value to just shy of €9.2bn.

Coupled with an estimated 7% — €342m — rise in import value to just over €5.2bn, Ireland’s trade surplus is deemed to have fallen by 10%, or €441m, to just over €3.96bn in May.

The EU accounted for €4.6bn of total Irish goods exports in May, of which €1.13bn went to Belgium and just over €1bn went to Britain.

Despite the growing notion that such analysis doesn’t tell us a great deal, economic commentators greeted yesterday’s data relatively positively.

“Whatever about 2017 and beyond, we still think the overall merchandise goods surplus this year will be higher than in 2015. We are projecting a positive trade balance for 2016 of €44bn-€45bn, which would be a new record high,” said Alan McQuaid, chief economist, Merrion Stockbrokers.

Last year’s surplus is estimated to have been around €42bn, which would be up by 38%, or €11bn on the previous year. The surplus in 2015 was the second largest on record, after 2010, and the first positive rise since the same year.

“The monthly goods trade data tell us only part of the Irish exports story. This week’s GDP release showed export growth in volume terms for both goods and services.

"The revision of 2015 GDP to an astonishing 26% was driven by an increase in goods exports of 71%. As we explained earlier in the week, this is due to a number of corporate inversions into Ireland in the pharmaceuticals sector,” said Davy Stockbrokers’ economist, David McNamara.

“Looking ahead, the recent volatility in the GDP numbers could persist and masks strong underlying improvements in the domestic economy,” he added.

Yesterday’s CSO figures coincided with fresh data — also for May — from the EU’s statistical agency, Eurostat, which showed a weakening in the eurozone’s trade balance.

The eurozone exported €167.4bn worth of goods in May and imported €142.8bn worth of goods.

The result of this was a €3bn, or so, drop in the region’s seasonally-adjusted trade surplus to €24.6bn.

Commenting on the data, leading UK economic think-tank, the Centre for Economics and Business Research (CEBR) yesterday said upcoming months could see further shrinkage in the surplus in light of a weak post-Brexit sterling value.

“The fall in imports raises some concerns about structural weaknesses in demand across the currency bloc.

In the five months to May, eurozone countries have bought 3% fewer goods than in the same period a year earlier. In the coming months, it is expected that the weakness of the pound should increase demand for imports from the UK and dampen exports,” the CEBR said.

Eurostat also noted yesterday that the eurozone returned to positive inflation in June, helped by higher prices for services.

However, the 0.1% figure remains far off the ECB’s 2% target, despite QE and ultra-low interest rates.

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