2/2/16: MNC Ireland: A new Documentary

A new and well-worth watching documentary on the power of multinational companies in Ireland and Ireland's status as a corporate tax haven is available here: https://vimeo.com/137175562.

Note: Strangely enough, the documentary cites me as a Chairman of the IRBA (which I was at the time). It is worth repeating again that I never speak on behalf of any organisation I am involved with and the IRBA never had a corporate opinion on any policy-related issues. I only express my own personal views.

11/11/2011: Industrial Production & Turnover - September

Industrial production and turnover figures for September provide some interesting reading. Monthly figures are significantly volatile, so some comparisons are tenuous at best, but overall, despite some downward pressures, the figures are encouraging. Here's why.

Industrial production index for manufacturing has declined from 116.4 in August to 113 in September - monthly drop of 2.92%. Year on year, September 2011 is still up 0.18% although index is down on September 2007 some 0.1%. The average of the 3mo through September 2011 was 2.2% ahead of the average for 3mo through June 2011 and 2.1% ahead of the 3mo average through September 2010. September 2011 reading is ahead of 6mo MA of 112.3 and 12mo MA of 111.7.

All of the above suggests the slowdown in activity in September was not as sharp as we might have expected given the adverse news flow from the rest of the Euro area.

All industries index has fallen from 115.2 in August to 111.2 in September, registering a yoy decline of 0.1% and mom drop of 3.47%. The index is down 1.67% on September 2007. Just as with Manufacturing index, All industries index 3mo average through September 2011 was up 2.59% on previous 3mo period and also up 1.82% on 3mo period through September 2010. The index was also above its 6mo MA of 110.7 and 12mo MA of 110.2. Again, this suggests that the slowdown is still shallow and there is some robustness in the series.

Both indices are still ahead of their readings in July and June. In fact, Manufacturing sub-index is resting at the second highest level since January 2011. The same holds for All Industries index.

Modern Sectors sub-index fell from 130.2 in August to 128.4 in September (-1.38%mom) but is up 1.18% yoy and 11.3% ahead of the reading for September 2007. 3mo average through September is 3.1% ahead of the 3mo average through June 2011 and is 1.8% ahead of the 3mo average through September 2010. The sub-index is ahead of its 6mo MA of 127.3 and its 12mo MA of 126.2. Modern Sector production activity remains at the second highest level since July 2010.

Per chart above, traditional sector production sub-index has fallen to 89.8 in September from 98.5 in August. The overall trend in the sub-sector is uncertain. Massive break out from the long term decline trend in August - with index posting the strongest performance since November 2008 is now followed by a contraction of 8.8% yoy and 1.8% mom in September. However, September reading still rests comfortably above the long term trend line and ahead of 6mo MA of 89.3 and 12mo MA of 89.1. This is the second strongest reading for the sub-index since September 2010.

Having shrunk to 31.7% in August, the gap between Modern and Traditional sectors has widened once again to 38.6%.

In terms of turnover, Manufacturing industries saw a significant decline in overall turnover activity from 104.3 in August to 100.5 in September. The index is now down 0.4% yoy and 3.64% mom. The index is also down 6.8% on September 2007. However, 3mo average through September is up 3.5% on 3mo average through June 2011 and also up 1.2% on 3mo average through September 2010. The good news is that September was the third consecutive month with turnover index at or above 100, which means that September reading is ahead of 6mo MA of 99.9 and 12mo MA of 99.5. But the gap is extremely small.

Transportable goods industries turnover also declined in September 2011 from 103.8 in August to 100.1. Mom, yoy and relative to September 2007 dynamics are virtually identical to those for Manufacturing sector. Similarities persist in comparatives for 3mo averages and for 6m and 12mo MA.

Hence, overall, turnover data is less encouraging than volume data, which is expected during the overall build up of pressures in global trade flows.

Also per chart above, new orders index came in at disappointing 99.6 in September down from 102.1 in August (decline of 1.09% yoy and -2.45% mom). Compared to September 2007 the index is now off 8.93%. 3mo average through September 2011 is 2.1% ahead of the 3mo average through June 2011, but is only 0.1% ahead of the 3mo average through September 2010. Current reading is very close to 6mo MA of 99.52 and to 12mo MA of 99.18.

So on the net, I am reading the numbers coming out for September as rather positive developments, signaling some resilience in Irish manufacturing and industrial production in the face of challenges across the euro area and other core trading partners. Of course, this data requires some confirmation in months ahead before we can pop that celebratory cork...

11/10/2011: Industrial Production & Turnover: Ireland August 2011

Production for Manufacturing Industries for August 2011 surprised to the strong upside rising 11.4% higher on August 2010 (unadjusted basis) and 1.2% (seasonally adjusted) over three months from June through August, compared to 3 months prior to June. Industries volume of production rose 10.4% year on year in August, also a strong gain. Monthly increase in volume in Manufacturing (3.6%) was the strongest monthly gain recorded since 9.0% increase in September 2010, and 4.4% monthly gain in Industries was also the strongest since September 2010 monthly rise of 6.9%.

Manufacturing and Industry indices, as shown above, rose well above the shorter-term average. However, the core break out from the previously established pattern of volatility around the flat trend was in the Traditional Sectors. Specifically, Modern Sector volume of production expanded by 10.2% year on year and 0.9% monthly. These were the strongest yearly gains in the series since December 2010 and introduce a break from annual contractions posted in three months between May and July. Traditional Sectors posted a massive 16.7% jump in volume of production in monthly terms - the largest monthly gain on the record and 10.8% annual rate of growth - also the strongest growth on record.

As the result, the gap between Modern and Traditional sectors activity by volume has closed substantially in August, from 43.3 in July to 30.3 in August posting the shallowest gap since August 2010.

Equally importantly, the seasonally adjusted industrial turnover index for Manufacturing Industries

was 7.0% higher in August 2011 when compared with August 2010, and 4.9% higher mom. The annual rate of growth in August was the highest since February 2011 and the monthly rate was the highest since May 2010.

Again, as per chart above, both series now have broken well above their flat recent trend, although the breakout is consistent with volatility in the Q4 2010-Q2 2011.

Another encouraging sign is that Modern Sector employment grew from 64,700 to 66,000 between Q2 2011 and Q1 2011, although it remains below 66,300 in Q3 2010. All other sectors employment expanded from 129,600 to 129,900 Q2 2011 to Q1 2011 and All Industries employment grew from 194,300 in Q1 2011 to 195,900 in Q2 2011.

In 3 months between June 2011 and August 2011, in year-on-year terms, the following notable gains and declines in volume activity were recorded in:

• In Food products and Beverages there was 0% growth in volume - an improvement on preceding 3 months period which recorded a yoy contraction of 5.4%, with Food Products contracting 2.4% yoy (improving on 8.5% yoy contraction in 3 months from May through Jul 2011), while Beverages grew by a substantial 12.2%, building on 10.6% yoy expansion in May-July.
• Textiles and wearing apparel volumes declined 28.5% yoy
• Printing and reproduction of recorded media sub-sector volumes shrunk 14.7%, a slight improvement on 15% contraction recorded in yoy terms for May-July period.
• Chemicals and chemical products grew 27.3% (there was 23.9% rise recorded in May-July period), while Basic pharmaceutical products and preparations sub sector volumes grew 2.0% offsetting 2.9 contraction in May-July.
• Computer, electronic, optical and electrical equipment sector volumes contracted 10.9% yoy, virtually unchanged on 11.0% decline recorded in May-July, primarily driven by Computer, electronic and optical products which account for 90%+ of total value added in the sector and which declined in volumes by 10.5% yoy (worse decline than 10.1 contraction in May-July)
• Machinery and equipment not elsewhere classified expanded by 19.1%
• Transport equipment grew by 14.8%
• Other manufacturing contracted by 8.8%
• Electricity, gas, steam and air conditioning supply volumes were up 1.5% yoy
• Capital goods sector volumes posted another contraction of 1.0% yoy, improving on 1.3 decline recorded in may-July
• Intermediate goods production volumes fell 13.2%, also better than 14.1% decline in May-July
• Consumer goods production grew 3.0%, reversing 1.8% decline in May-July, of which durable goods production volumes were up 12.2% although these account for 1/32nd of the total value added in the category, non-durable goods grew by 2.9%.
• 
  

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.

Economics 25/09/2009: Notes on trade flows

Per separate CSO release (see national accounts and broader trade flows discussion here), however, the positive trends in exports shown in the figures for Q2 2009 have not held into Q3: seasonally adjusted exports fell by 8% in July 2009, relative to June 2009 and imports hit a new low point for recent years.

June 2009 exports showed some bounce (due to volatility) having increased by 5% relative to May 2009 while imports decreased by 9%. Thus, July changes erase positive momentum in exports and continue to exacerbate negative movements in imports.

Given that for volatile time series during the periods of contraction seasonal adjustments can mask true extent of falls, taken on an unadjusted basis, the value of exports in July 2009 was 5% down on July 2008, while the value of imports was down 31%. The value of exports in June 2009 was up 5% on June 2008 and the value of imports was down 24%.

This is worrisome, as H1 2009 posted overall rise in exports of 2% on yoy basis. This was led by MNCs-dominated sectors: medical and pharmaceutical products increased by 22%, organic chemicals by 19%, other transport equipment (including aircraft) by 262% (€414m) and professional, scientific and controlling apparatus by 11%. On the back of large layoffs in the sector, computer equipment decreased by 27%. Capital investment cycle hit hard electrical machinery (down 28%), industrial machinery down 37%, telecom equipment fell 23% and power generating equipment contracted by 45%.

Imports decreased 21% in H1 2009. Aside from predictable cars and retail goods, investment-related goods imports also contracted severely: computer equipment by 40%, specialised machinery by 54%, industrial machinery by 36% and electrical machinery by 16%.. Petroleum products imports fell by 38%, signaling that MNCs might be reducing output here, while increasing value of output registered to Ireland (transfer pricing). Ditto for small increase of 4% in medical and pharmaceutical products, and organic chemicals also rising by 4%, - both major inputs into allegedly booming pharma and medical devices sectors. Goods from the United States increased by 34% - again a sign of more value being booked on importation side of MNCs.
Table above shows that MNCs-dominated sector of chemicals and related products (pharma etc) has increased its overall share of exports in June 2009 and in H1 2009. Other sectors remained relatively stable with modest increases in the share, except for computers-dominated machinery and transport equipment sector. But there is more trouble ahead:
In bold in the above table I have marked those sectors where there has been expanding imbalance between exports and imports. This imbalance suggest to me that international companies are shipping fewer inputs into Ireland, while managing to ship more outputs. This can only be done in a wondrous world of accounting procedures designed to reduce tax exposure.

Again, banana republic…

Economics 10/08/2009: Industrial production blues and fun-NAMA

Brian Lucey has an open petition on NAMA on his site (here):
http://brianmlucey.googlepages.com/namapetitionandoireachtasemails
which is, in my view, spot on in terms of what each member of Oireachtas should read before the NAMA debate takes place.


Before we begin with CSO's data on industrial production - few NAMA posters are posted below, so do make sure you get to the end of this post...


CSO data on industrial production was published earlier today. Trumpets are blowing that things are turning around for Ireland Inc. But hold your horses...

On an annual basis production for Manufacturing Industries for June 2009 was 4.3% higher than in June 2008. So turnaround is here, then? Well, no... The most significant changes were in:

• Basic pharmaceutical products and preparations (+35.1%),
  
• Other manufacturing (+25.9%) and
  
• Computer, electronic and optical products (-17.7%).

What does the above mean? Pharma guys are chugging along in transfer pricing / tax optimization, but computers and electronics - hammered by exits and layoffs and the collapse in private investment worldwide - can't even master a tax optimization scheme. I mean, Table 3 in CSO release clearly shows this sector having suffered the greatest layoffs of all other sectors in proportional terms, and of all other Modern sectors in absolute and proportional terms.

The seasonally adjusted volume of industrial production for Manufacturing Industries for the three month period April to June 2009 was 2.0% lower than in the preceding three month period. This is volatile stuff, so 3-mo aggregates are a bit more telling.

The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed an annual increase in production for June 2009 of 16.0% - the same transfer pricing argument holds. But there was a decrease of 16.6% in the “Traditional” Sector.

The seasonally adjusted industrial turnover index for Manufacturing Industries was 1.9% lower in the three month period April to June 2009 when compared with the preceding three month period. Now, outside the current crisis, turnover is actually less volatile than production volumes, and yet now it tracks almost 1:1 the more volatile series. What's going on? I am not sure, but one potential explanation is that we have gone into a severe enough jobs/production capacity cutting mode earlier this year to allow for some stabilization during May-August period. Of course, this means September-October turnover will make or break our stabilization. If turnover falls, new layoffs will be coming. If it rises, well, if it rises by a hell of a lot, then hiring might commence.

On an annual basis turnover was 0.6% lower when compared with June 2008.

Now, few interesting charts:
Taking a closer look above, compare the changes over the last four months reported relative to sector activity in 2005 (the 100 line):

• In March 2009, 8 sectors performed above their 2005 levels in volumes. In June, the number was 6.
• But in April 2009, this number was 5, while in May it was 3...

In effect, the whole manufacturing sector is sick and the disease is not new to this crisis. Read through this chart above - it is really, really telling. The same chart with monthly changes May-June (preliminary results, of course for June) - 11 sectors show no improvement, 9 show improvement.

Now step back for a bit of a broader view:
Self-explanatory, but few notes worth making:

• Capital goods are slightly up +4.66% mom in June, but that is after being slightly down -2.83% in May, so change on March 3.75%, but on April only 1.7%. Not exactly a robust start of a new cycle here, but not a disaster.
• Intermediate goods down - MNCs might be scaling back for summer.
• Consumer goods up, but no durables - weather effect?

Unfortunately, CSO can't get their act together on surveying new orders for all sectors, so we have a snapshot of what's happening in the very limited number of areas. But what the chart below really shows us is our dependence on MNCs - yeah, those American (and other countries') companies who are still trading, if only because of our tax arbitrage opportunity...

Credit for the following due to:
http://img7.imageshack.us/img7/5391/namahaughey.jpg
http://i38.photobucket.com/albums/e146/vgupload/sofew02.png