Friday, December 14, 2012

14/12/2012: Irish external trade in goods: October 2012

Irish trade in goods stats are out for October 2012 and here are the core highlights (aal seasonally adjusted):

  • Imports of goods in value have fallen from €4.482bn in September to €4.188 billion in October, a m/m decline of €294mln (-6.56%) and y/y increase of €327mln (+8.47%). Compared to October 2010, imports are up 16.43%
  • Imports were running close to historical average of €4.404bn in October, but below pre-crisis average of €4.673bn and ahead of crisis-period average of €4.126bn. Year-to-date average through October was €4.109, so October imports were relatively average.
  • Exports increased from €7.349bn in September to €7.468bn in October (up €119mln or +1.62%). Year on year, however, exports are up only €7 million or +0.09% and compared to October 2010 Irish exports of goods are down 1.48%.
  • Year-to-date average exports are at monthly €7.687bn which means October exports were below this, although October exports were very close to the crisis period average of €7.433bn.

  • Overall, the rise of €423mln in trade surplus can be attributed as follows: 71.2% of trade surplus increase came from shrinking imports, while 28.8% came from rising exports. Not exactly robust performance, especially given exports are up only 0.09% y/y.
  • Trade surplus expanded by 14.4% m/m after a rather significant drop off in September. However, october trade surplus at €3.28bn was still the second lowest reading in 7 months.
  • Year on year, trade surplus in October actually fell €321 million or -8.91% and compared to October 2010 trade suplus is down 17.65%. These are massive declines and worrying.
  • Trade surplus in October 2012 stood ahead of the historical average of €2.903bn and ahead of pre-crisis average of €2.513bn - both heavily influenced by much more robust domestic consumption in years before the crisis. Crisis period average of €3.307 is slightly ahead of October 2012 reading. However, average monthly trade surplus for 12 months through October was more robust (€3.578bn) than that for October 2012.

Here are some charts on the relationship between exports, imports and trade balance:

Accordingly with the above, imports intensity of exports rose slightly in October on foot of a steep fall-off in imports, rising 8.75% m/m. However, the metric of 'productivity' of irish exporting sectors is now down 7.72% y/y and down 15.38% on October 2010. During crisis period, Exports/Imports ratio averages 182.4%, while YTD the ratio averages 188.0%. In October 2012 it stood at 178.3% well behind both longer term trend metrics.

Lastly, the above relatively poor performance of exporting sector came amidst two forces, both representing adverse headwinds for Irish exporters:

  1. Global trade slowdown
  2. Term of trade deterioration.

October 2012 on October 2011, saw decreases in the value of exports of Chemicals and related
products - down -€253 million (or -6%), and a decrease of €513 million in Organic chemicals, "partially offset by an increase of €208 million in Medical and pharmaceutical products" per CSO. Further per CSO: "The value of exports increased for Miscellaneous manufactured articles (up €91 million), Mineral fuels (up €54 million), Machinery and transport equipment (up €47 million) and Food and live animals (up €39 million)... The larger increases were for imports of Food and live
animals (up €116 million), Mineral fuels (up €96 million) and Machinery and transport equipment (up €92 million)."

So to summarize: headline rise in tarde surplus is driven more than 3/4 by drop off in imports, with exports performing poorly on y/y basis and m/m basis. However, we have to be cognizant of the adverse headwinds experienced by irish exporters in global markets and by the continued effect of pharma patent cliff.


Anonymous said...

My compliments on the superb data analytics.
But I am concerned about the underlying data. Given the distorting effects of profit-shifting on values of goods imports and exports, particularly in pharma, and the unknown scale and extent of this across the last decade (i.e. is the proportion of 'phantom activity' increasing or not) can any safe conclusions be drawn from this data?

TrueEconomics said...

To be honst, not on any meaningful value added in real terms. For that we need to look at the data by sector, rather than by flow. However, with transfer pricing etc, we still have trade surplus recorded etc, so on flows side - meaningful analysis is possible from the above data. In terms of actual physical activity - not in short term.

TrueEconomics said...

To B. who asked for his/her comment to be kept private - my many thanks for the note and best wishes for you and your family for this Christmas season. And a special wish for you - keep on fighting! Wish I could have had a chance to sign those books for your friends and family.

And please, do comment any time on any topic!