Output falls 2.3% in first quarter compared to last year

MANUFACTURING OUTPUT has dropped 2.3 per cent during the first quarter compared with the same period last year, according to figures released by the Central Statistics Office (CSO).

While the first-quarter figures show a continuation of the downward trend seen in the final quarter of 2008, the rate of decline has slowed, the CSO’s industrial production and turnover index found.

Alan McQuaid, economist at stockbroking firm Bloxham, said if the purchasing managers’ manufacturing indices for March and April were also factored in it appeared the sector had “hit the bottom”.

However, he cautioned that manufacturing was likely to remain in a “contractionary phase” for an extended period.

During first-quarter, the modern sector, which includes technology and pharmaceutical firms, posted an average annual increase of 2.4 per cent compared to a decline of 15.2 per cent for companies in the traditional sector.

According to Mr McQuaid, this highlights “the divergent performance of the multinational sector and the indigenous sector, with the latter particularly badly hit by the weakness of sterling versus the euro”.

On the basis of yesterday’s data, Mr McQuaid is forecasting a 5 per cent decline in the volume of manufacturing output this year, followed by a 2.5 per cent contraction next year.

He said the weak global economic climate, coupled with the strength of the euro, suggested this year and next were likely to be “fairly difficult for the Irish manufacturing sector”.

In March manufacturing output was 6.7 per cent lower than the same month last year, although there was a 3.8 per cent improvement when compared with February.

Separate external trade data released by the CSO yesterday showed the seasonally-adjusted value of exports fell 6 per cent to €7.3 billion in March. Imports were unchanged at €4.14 billion when compared with February

This contributed to the first-quarter trade surplus rising to over €10 billion as a sharp spending slowdown by consumers led to lower imports.

Dr Ronnie O’Toole, chief economist with National Irish Bank, said the rapid rise in imports over the last decade as consumption surged was being reversed as households reduced borrowing and increased savings.

“Weaker consumer demand has sharply reduced demand for cars and white goods, which has resulted in a particularly sharp fall-off in the volume of Asian imports.”

During the first two months of the year imports were 25 per cent lower compared with the same period last year – the number of road vehicles brought into the State has collapsed by 74 per cent.

This resulted in the seasonally-adjusted trade surplus in March narrowing to €3.14 billion from €3.6 billion the previous month.

Dr O’Toole said imports of plant machinery had fallen rapidly in the third-quarter of last year, although the latest data shows that they were recovering.

“While the fall in the importation of capital goods is to be expected in a time of economic uncertainty, it is likely that this fall in demand will be temporary. The upward trend in the latest data is likely to continue over the course of the year as global economic prospects continue to brighten.”