Source: CSO

The seasonally adjusted volume of production for Irish Manufacturing Industries was 1.2% higher than in May 2010. The ‘Modern’ sector comprising a number of high technology and chemical sectors showed a monthly rise of 1.6% while a decline of 1.8% was recorded in the ‘Traditional’ sector.

Provisional estimates for the second quarter show that production volumes declined by 3.6% from the preceding three month period. The most significant contribution to this decline was a 5% fall in the Pharmaceutical sector .  On an annual basis production was 5.9% higher in June 2010 than the corresponding month in 2009. Both the ‘Modern’ and ‘Traditional’ sectors recorded annual increases of 4.9% and 7.5% respectively.

The seasonally adjusted industrial turnover index for Manufacturing Industries was 5.8% higher in the three month period April 2010 to June 2010 when compared with the preceding three month period. On an annual basis turnover was 1.6% higher when compared with June 2009.

Davy chief economist, Rossa White, commented:

Industrial production resilient in Q2

• Irish industrial production dipped slightly in Q2, but that followed the surge in Q1.
• Output fell 3.2% quarter-on-quarter (qoq) in volume, following a 15.5% jump in Q1.
• Production is notoriously volatile, thanks to the foreign-owned chemicals/pharma sector. To highlight that volatility, the ‘modern’ sector (chemicals, software, computer hardware, electrical equipment and medical devices) saw output drop by 4.1% in Q2. That grouping had jumped 22.2% in Q1. It is not worth reading too much into quarterly swings for the multinational manufacturing sector, never mind monthly changes.
• Because Irish exports are import-intensive — and much of the value-add accrues to foreign owners of capital — the data are not a reliable guide to Q2 GNP. But the performance of indigenous industry is encouraging.

Good news is that indigenous industry is gradually recovering after painful recession

• Output in indigenous industry is less volatile than the multinational sector. The good news is that the mainly Irish-owned part of manufacturing is definitely recovering slowly. Production increased for the third straight quarter in Q2. It expanded 2.3% qoq, after +2.9% in Q1 and +1.1% in Q4 2009. That sector had been mired in recession for six quarters from Q1 2008 — output actually dropped 21% from peak-to-trough. It is more labour-intensive than the ‘modern’ sector.

Momentum has slowed into the second half of the year

• Momentum into Q3 is not that strong, however. Based on the recent PMI new orders, manufacturing is set to experience a softer patch in the next few months. It is to be hoped that €/£ stays in the low 0.80s, to underpin indigenous industry in H2.