21/09/2011: Ireland's External Trade for July 2011

Trade stats for Ireland for July are out today and as predicted, trade balance has shrunk somewhat off its historic high attained in June. Here are the details:

• Seasonally adjusted exports fell 11.74% to €7,027.2mln in July down from €7,961.9mln in June. Year on year exports are down €763.4mln or 9.80%. Relative to July 2009 levels, exports are down €32.3mln or 0.46%.
• To remind you, H1 2011 exports stood at robust €46,450.4mln well ahead (+6%) on €43,821.9mln in H1 2010 - a difference of €2,628.5mln.
  
• Imports, seasonally-adjusted, increased in July to €3,876.6mln - a rise of 2.57% mom and 2.40% yoy. Compared to same month in 2009, imports are up 4.14%.
• H1 2011 imports stood at €24,929.2mln up 8.44% on same period of 2010.

As the result, trade balance fell 24.67% mom to €3,150.5mln, with annual rate of decline standing at 21.34% and relative to same period in 2009, trade balance is down 5.59%. Much of this seems to be accounted for by a combination of an increase in imports from the Chemicals & Related Products and decreases in the same sector exports, although current release does not provide sectoral data breakdown for July (data is supplied with 1 month lag).
Terms of trade remained subdued at the lower end of export prices
Terms of trade in June were up to 78.2 (higher ratio of export prices to import prices) from 76.9 in May 2011, but year on year terms of trade are still down by 11.5% and relative to June 2009 terms of trade are now also lower by some 10.73%. as highlighted below:
Imports intensity of exports also fell - perhaps in part due to rebuilding of supply stocks (higher imports) in core exporting sectors, such as Chemicals:
Imports intensity of Irish exports (ratio of exports value to imports) now stands at 181.3% in July 2011, down from a record-breaking 210.7%. This reflects a normal pattern of supplies inventories exhaustion followed by subsequent rebuilding. Two interesting trend, however emerge from the above chart:

• Overall imports intensity of Irish exports rose during the period of the current crisis due to two factors - the catastrophic collapse of consumer good imports and increased incentive to engage in transfer pricing for the MNCs
• Imports intensity of our exports also became much more volatile in the current crisis, again due to removal of the stabilizing factor of domestic consumption imports and due to possible reduction in the willingness of the MNCs to hold longer stocks of inputs (possibly reflecting generally elevated uncertainty of global demand).
  

Again, as a reminder of previous robust performance, and to correct for embedded monthly volatility in the trade data, the figures for H1 2011 compared with H1 2010 show that:

• Exports increased by 7% to €47,114mln
• Exports of Medical and pharmaceutical products increased by 14% or €1,754mln
  
• Exports of Organic chemicals rose by 13% or €1,194mln
• Exports of Computer equipment fell by 7% or €142mln
  
• Exports of Telecommunications and sound equipment decreased by 25% or €107mln
• Exports to the USA increased by 14% or €1,337m while exports to Spain fell by 16% or €276mln
• In the H1 2011, 23% of Ireland’s exports went to the USA, with Belgium (16% - as an enter-port) and Great Britain (13%) being the other dominant markets
• Imports increased by 9% to €24,992mln
• Imports of Petroleum increased by 24% or €496mln
• Imports of Medical and pharmaceutical products rose 24% or €419mln
  
• Exports of Organic chemicals increased by 26% or €279mln
  
• Imports from Great Britain rose by 19% or €1,191mln and from Germany by 16% or €256mln
• Over half (53%) of Ireland’s imports came from Great Britain, the USA and Germany in the first half of 2011

On the net, July figures can prove to be a temporary correction and should be taken less as a signal of real weakness, and more as a temporary downshift along the continuously rising trend line.

However, so far, January-July 2011 data suggests the annual rate of growth in imports of just under 8%, in exports of just over 3.6% and the trade surplus decline of just under 1%. P{ut differently, January-July cumulated imports now stand at €28.8bn against €26.77bn in the same period of 2010. Meanwhile, exports are at €53.48bn against €51.61bn. This means January-July 2011 trade surplus is running at a cumulative €24.67bn against same period 2010 trade surplus of €24.84bn. Sorry to say it, I am not seeing 6-8% trade expansion here, at least not for the first seven months of the year.