Ireland set to benefit from US economic surge
The Irish Manufacturing Purchasing Managers Index showed that manufacturing 'boomed' in April, breaking monthly records since the readings first started 23 years ago.
Ireland is set to benefit from an economic surge in the US, with unemployment here to drop below the 10% previously forecasted for the year-end, senior economists have said.
Irish manufacturing has started to boom in recent weeks and is even struggling to keep up with global demand, according to a new survey.
The Irish Manufacturing Purchasing Managers Index showed that manufacturing "boomed" in April, breaking monthly records since the readings first started 23 years ago.
AIB chief economist Oliver Mangan said the April returns for purchasing managers working at the heart of Irish manufacturing had reached "record or near-record readings" as factories based here join in "a global rebound in industrial activity".
Significantly, manufacturing employment rose in the month and expectations of continuing growth for the next 12 months were also running at a record level, as optimism grows in tandem with Ireland reopening.
Similar surveys of manufacturing around the world in recent days tell the same story of a global economy that is set for a huge rebound, led by the US where president Joe Biden last week announced a further $1.8 trillion of stimulus measures.
The IMF recently revised upwards its forecast for US growth for this year to 6.4% and the Organisation for Economic Co-operation and Development is projecting something similar.
Both are forecasting further strong growth of between 3.5% and 4% in 2022, which would mark the strongest back-to-back growth rates in the US for decades.
The Irish manufacturing survey is closely watched because so many of the goods made by multinationals here, such as pharmaceuticals, medical devices, and computer parts, are destined for global markets that are rapidly rebounding from the Covid-19 slump.
If the manufacturing trends are maintained here, there is potential for parts of the Irish corporate tax receipts to rise, said Kieran McQuinn, research professor at the Economic and Social Research Institute.
Prof McQuinn said the ESRI may now look to increase its targets for economic growth and Government tax revenues this year amid signs the recovery is taking hold faster than anticipated, and that unemployment may fall faster by year-end, below the 10% rate the ESRI had previously forecast. The average monthly unemployment rate in 2020 was 18.7%.
"There is more of a sense of optimism that is tied in with the public health news even in the last couple of days which has been a bit better than most people were expecting," Prof McQuinn told the .
"[This suggests] that normal economic conditions are set to resume, if anything a little quicker than we were anticipating," he said.
Independent economists say that Finance Minister Paschal Donohoe and Public Expenditure and Reform Minister Michael McGrath have been talking up the costs of the pandemic unemployment payments and the wage-support schemes as a way of managing expectations.
Mr McGrath revealed on Sunday that the Government will prepare a plan for the end of this month to "taper-off" Covid-related supports for businesses and workers beyond June.
It followed the Government's decision last week to bring forward the reopening of many sections of the economy, with Mr McGrath predicting that the hospitality sector will have a busy summer.
Senior economist Jim Power said that one of "the big stories" is that the profits US tech giants are reporting are "in the stratosphere".
"One of the implications of that is that there is likely to be another surge in Irish corporate tax revenues this year," Mr Power said.
Given the outsized contribution big tech multinationals such as Apple and Google make to Ireland's finances, the exchequer will post another record corporate tax year, he predicted.
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