Wednesday, August 10, 2011

10/08/2011: Industrial Production and Turnover: June 2011

Industrial production for June confirms the trend spotted here few months ago: Irish economic recovery (or rather the nascent signs of it) is now running out of fuel.

Industrial production has been a bright spot on our economy's horizon, primarily thanks to the MNCs. In annual terms:
  • 2010 index of production for Manufacturing Industries rose to 110.1 up on 2009 level of 101.7 and regained the 109 mark reached in 2007.
  • All Industries index too reached to 108.7 - above 108.4 in 2007.
  • Modern Sectors - MNCs-dominated area of industrial production - were the core drivers, starting with the reading of 111.2 in 2007, falling only slightly to 109.8 in 2008, then climbing to 112.6 in 2009 and rocketing off to 124.7 in 2010.
  • Meanwhile Traditional Sectors were just beginning to lift their head in 2010: after posting the reading of 104.7 in 2007, the sector fell to 100.4 in 2008, followed by a collapse to 86.2 in 2009 and a slight rebound to 87.8 in 2010.
All of these positive dynamics are now changing and not on a monthly volatility - along a new trend.

First the latest data on Production indices:
  • Manufacturing sectors production have risen to 111.4 in June, relative to May 2011, however, the index remains flat since June 2010. The 6mo average and the 12mo average for the series are both at 111.2.
  • All Industries index for production is now at 109.9, slightly up on May 109.3, but again, the series are not going anywhere in the medium term. The index is basically flat since June 2010 and 6mo average is at 109.5, while 12 months average is at 109.6.
  • Modern sectors index for production volumes is now at 125.6, up from 123.8 in May. Again, as above, this is now flat on July 2010 with the 6mo average of 124.9 and 12 months average of 125.6
  • Traditional sectors posted a monthly contraction in June to 89.8 from 91.8 in May. Again, the index is broadly flat since August 2010 and 6mo average for the series is at 89.3, although 12 months average is at 88.9
Chart below illustrates:

One continued trend has the widening gap between the Modern sectors and Traditional sectors. The gap between two series increased from 32 points to 35.8 points in May to June 2011. However, as the chart below illustrates, this gap is now trending along the flat since September 2010.
Turnover data paints a slightly different picture. First, consider annual indices:
  • Manufacturing Industries turnover peaked in 2007 at 106.9 before falling to 93 in 2009. 2010 saw the index regaining some of the lost ground at 97.5
  • Transportable Goods Industries turnover peaked at 107.3 in 2007 before falling to the trough of 92.8 in 2009 and then rising to 97 in 2010.
Now, on to monthly readings:
  • Manufacturing Industries turnover index stood at 98.6 in June 2011, down from 99.5 in May. The index average over the last 6 months stands at 98.7 and for the last 12 months the index average is 99.5. In other words, once again, we are seeing a relative flattening of the trend for already shallow gains since the trough.
  • Transportable Goods Industries turnover index fell from 99.1 in May to 98.3 in June and confirms the relatively flat trend over the last 12 months.
  • In line with the above, New Orders Index has fallen from 99.8 in May to 99.3 in June. Again, as the chart below shows, the series is running along the flat trend since mid 2010

Overall, while monthly changes on volumes were somewhat in-line with previous growth trends (except for Traditional sectors), the volumes growth is now appearing to have established a flat trend since mid 2010. Exactly the same applies to Turnover indices (which are also showing monthly deterioration) and to the New Orders index.
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