Irish industrial production rises at fastest pace since 1998 - but it may be an illusion
Irish industrial production rose in November at the fastest pace since 1998 according to the CSO Friday but this may be an illusion as tax avoidance-related overseas "contract manufacturing' is counted as Irish output.
The CSO said that production for Manufacturing Industries for November 2014 was 4.0% higher than in October 2014 . On an annual basis production for November 2014 increased by 33.0% when compared with November 2013. The seasonally adjusted volume of industrial production for Manufacturing Industries for the three months September 2014 to November 2014 was 14.8% higher than in the preceding three month period.
The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly increase in production for November 2014 of 9.3%. There was a monthly decrease of 4.4% in the “Traditional” Sector.
There was a plunge of 14.5% in the seasonally adjusted industrial turnover index for Manufacturing Industries in November 2014 when compared with October 2014. On an annual basis turnover increased by 19.3% when compared with November 2013.
David McNamara, economist at Davy, commented: "Today’s industry data point to a surge in output in the second half of 2014. Output was up 4% in November, and a massive 33% on the year. Year-to-date, industrial production has now expanded by 22% on 2013, driven by a bounce-back in the pharma-dominated ‘modern’ sector, up 33.9%, and an 8.1% rise in the labour-intensive 'traditional’ sector.
This suggests that industry and exports made a further strong contribution to Irish GDP growth in Q4. In Q3, industry was up 1.2% year-on-year. Of course, much of the growth relates to volatility in the pharmaceutical sector, which could quickly unwind as in previous cycles. Moreover, contracted production carried out abroad by Irish-registered companies boosted output in 2014. Nevertheless, the most encouraging aspect of today’s data is the strength of the ‘traditional’ sector, where over two-thirds of the manufacturing workforce is employed. In the year to Q3, employment growth in industry was surprisingly down 1.3%, but the PMI (purchasing managers' index) surveys point to the fastest rate of jobs growth in 15 years, so the immediate outlook is positive for the sector [Irish PMI data is better at measuring trend that actual level; SEE here - The idiot/ eejit's guide to distorted Irish national economic data].
All in all, Ireland’s manufacturing sector is set for its fastest pace of growth since 1998. A flat December would leave output up 20% in 2014. While much of this is related to the multinational sector, with little feed-through to the real economy. However, the ‘traditional’ sector is also set for the fastest pace of growth since 2000 at about 9% for 2014, with surveys pointing to continued growth in 2015."
43% of rise in H1 2014 GDP from manufacturing overseas - Irish Fiscal Council