Thursday, January 16, 2014

16/1/2014: Trade in Goods: November 2013

Ireland's seasonally adjusted trade surplus for trade in goods only (excluding services) was down 15% in November compared to October.

Per CSO, there was "a decrease in seasonally adjusted exports of €327 million (-5%) to €7,009 million" in November 2013 compared to October. Seasonally
adjusted imports rose by €132 million (+3%) to €4,472 million. Thus, seasonally adjusted trade surplus fell to €2,538 million - "the lowest seasonally adjusted trade surplus since August 2008."

Year on year, "the value of exports decreased by €607 million (-7%) to €7,710 million. The main drivers were decreases of €572 million (-25%) in the exports of Medical and pharmaceutical products and €158 million (-8%) in the exports of Organic chemicals. … Comparing November 2013 with November 2012, the value of imports rose by €335 million (+8%) to €4,377 million. Imports of Machinery specialised for particular industries increased by €121 million (+175%)."

With 11 months of data in, we can provide a reasonable approximation for H2 2013 data and full year outlook. Caveat - these are simple extrapolations from 11 months data.

The first chart shows annual data for exports. Based on January-November data:

- Annual imports are set to rise by ca 0.4% y/y, after having posted a 1.76% rise in 2012 and 5.55% rise in 2011. On a cumulative basis, imports rose by EUR3.582bn over 2011-2013 period.
- Annual exports of goods are set to post a contraction of approximately 4.3% y/y against 2012 annual growth of 0.5% and 2011 annual expansion of 1.70%. Cumulatively from January 2011 through the end of 2013, exports of goods are set to shrink by EUR1.975bn.
- Note that in all three years: 2011, 2012 and 2013 exports growth under performed imports growth and this is before any significant uptick in domestic consumption demand for imports or domestic capes demand for imported capital goods.
- Trade surplus for 2013 is expected to decline by around 9.8% on 2012 levels, after having posted a decline o 0.9% in 2012 and a decline of 2.3% in 2011. Cumulatively over the last 3 years, the decline in trade surplus amounted to EUR5.557bn.

The next chart plots annual rates of growth and 10-year growth rates averages. This shows that the current decade is the worst in the history of the state with exception of the 1930s, with the decade of 2000-2009 being the third worst.

This puts into perspective the problem with the assumed debt sustainability framework based on growth in exports. The chart above shows exports of goods only, omitting exports of services. Two points, however:
1) In the 1990s, recovery was led by exports which were predominantly on the goods side, so the average rates in the chart for the decade of the 1990s are closely correlated with total exports growth rates. Today, growth in services exports outpacing growth in goods services has much lower impact on the economy overall, since exports of services are less anchored to the domestic economy and are more reflective of the aggressive tax optimisation strategies of the MNCs operating in the ICT and IFS services areas.
2)Services exports growth is slowing so far as well. This was covered here:

Finally, the last chart plots exports of goods adjusted for prices changes and exchange rates using Trade Price Index for Exports, expressed in 2006 euros.

The upward correction in 2009 and 2010 period now is almost fully erased by declines since 2010. And the decline seems to be accelerating.

Most of the above declines in exports in the last two-three years has been driven by the pharmaceuticals sector. I will be covering this topic when dealing with more detailed composition of exports once we have data for December 2013. In the mean time, you can see CSO data for January-November 2013 y/y comparatives in Table 3 here:

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