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%.
• 
  

12/08/2011: Industrial Output - Euro area June 2011

European industrial production indices released today show that through June 2011, core Euro area economies have slowed down significantly their industrial and manufacturing output growth. This outcome, well flagged earlier by PMIs and eurocoin leading indicator of economic activity, implies that in all likelihood, Euro area growth for Q3 2011 is going to show if not an outright contraction, at the very least flat-line performance.

For Ireland (we have data through July now - see PMI data analysis for manufacturing and services, plus additional analysis of exporting activity and industrial turnover and volumes) this trend is now fully established with either contraction signals remaining persistent over recent months or flat-line trend being established on more volatile industrial production data for some 12 months now.

But what about the rest of the EU and the Euro area? Here is the data.

Industrial production index showed a decline from 101.63 in May to 100.94 in June for the first time since September 2010 (against 2008 average of 106.6, 2009 average of 90.88, 2010 average of 97.66 and 2011 average to-date of 101.18) driven, primarily by:

• Germany index falling from 111.7 in May to 110.8 in June, with current 2011 average to-date standing at 110.37, up on 2010 average of 103.48, 2009 average of 93.46, but below 2008 average of 111.73
• Greece contracting from already recessionary 75.68 in May to 74.02 in June - the worst performance since 1994 when the series began
• Spain posted a decline from 84.97 to 84.26 between May and June this year. This compares poorly against the running average for 2011 to-date of 84.87, 2010 average of 84.68 and 2008 average of 99.55. However, the index is still above 2009 average of 83.97
• France also recorded a decline in industrial activity from 94.80 in may to 93.20 in June with current average for 2011 to-date standing at 93.93, ahead of 2010 level of 91.49 and 2009 level of 86.95, but below 2008 average of 99.40.
• Italy recorded a decline from 90.00 in May to 89.5 in June with current 2011 average to-date remaining ahead of 2009 and 2010 averages, but well below 2008 average of 102.00
• Netherlands, Denmark, Portugal and Finland showed declines in their indices in June
• Ireland and the UK were the two countries in the series to show an increase in the index, while Belgium, Austria and Sweden did not report data for June.
• Poland showed a slowdown in the sector from 143.7 in May to 140.6 in June with current 2011 average to-date standing at 140.77, still significantly up on 2010, 2009 and 2008 averages
• The UK posted a marginal increase in the index from 89.57 in may to 89.58 in June with current 2011 to-date average running at 90.09 - ahead of 2010 average of 89.99 (marginally) and 2009 average of 87.74, but below 2008 average of 97.58.

Charts to illustrate (note: SOEs refers to Small Open Economies):

On Manufacturing side: Denmark, Germany, Greece, Spain, France, Italy, the Netherlands, Poland, Portugal, Finland and the UK all showed declines in output activity. Only Ireland posted a rise in June.
Euro area manufacturing activity overall fell from 102.76 in May to 101.67 in June and is now below 2011 average to-date of 102.32, although still running ahead of the annual averages for 2009 and 2010. 2008 annual average was 107.27, well ahead of the activity levels to-date.

New orders also came in disturbingly lower at 104.64 in June down from 105.74 in May. New orders index now running below its 2011 to-date average of 104.77 and below 2008 average of 110.09, thaough still well-ahead of 2010 and 2009 averages.
Again, as before, new orders fell in Denmark, Germany, Greece, Spain, France, the Netherlands, Poland, Portugal, Finland and the UK. The New Orders sub-index rose in June in Ireland and Italy.

Capital goods production declined significantly in the Euro area from 107.05 in may to 105.5 in June and now stands below 105.55 running 2011 average to-date, ahead of 2009 and 2010 averages, but below 2008 average of 113.52.
In terms of individual countries, capital goods output fell in Denmark, Germany, Ireland, Greece, Spain, France, the Netherlands, Poland and Portugal. Output rose in Italy, Finland and the UK.

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.

11/07/2011: Industrial production for May 2011

Industrial Production data for May was published earlier today by CSO, so here are updated charts and some core results:

Per CSO: "Production for Manufacturing Industries for May 2011 was 0.3% higher than in May 2010. The seasonally adjusted volume of industrial production for Manufacturing Industries for the three month period March 2011 to May 2011 was 1.4% lower than in the preceding three month period." Let's add some more analysis to that:

• May level of production in Manufacturing stood at 110.9, down 0.18% on 3 months ago and up 0.54% yoy.
  
• There was zero change mom from April.
  
• May 2011 index stood 2.43% above the comparable period in 2007. Last 3mo simple average of industrial production was 1.28% below the same figure for 3 mo before and 1.75
• % above the same period yoy.
  
• So on the net, there is roughly no improvement since Q2 2010.

All industries high level data:

• May index for volumes in All Industries stood at 109.6, up from 109.1 in April (+0.46% mom) and up 0.27% on 3 mo ago. Index is up just 0.09% on May 2010.
• Index is now up 1.56% on May 2007
  
• 3mo average to May 2011 fell 1.24 compared to 3 mo period before but rose 1.27% yoy.
• So just as with volume index for Manufacturing, All Industries volumes remain relatively flat since Q2 2010.
  

Again, per CSO: "The “Modern” Sector, comprising a number of high-technology and chemical
sectors, showed an annual decrease in production for May 2011 of 1.5% while an increase of 4.4% was recorded in the “Traditional” Sector." Some more details:

• Modern Sectors volume of production fell 0.88% mom from 124.8 in April to 123.7 in May, relative to 3mo ago index is down 0.72% and yoy index is down 1.12%. Index is now 13.51% above the reading in may 2007 - an impressive cumulated performance.
• However, the current 3mo average declined 1.93% on previous 3mo average, though March-May 2011 stands 0.79% above the same period average year ago.
• So again, moderately flat trend along 123.8 since Q2 2010.
• Traditional sectors reversed 3 consecutive months of relatively shallow declines in May to show a 5.83% mom improvement - a strong monthly gain. Index is now 4.04% up on 3mo ago and 4.16% up yoy. However, index remains 12.78% down on May 2007 levels.
• Traditional sectors volume index average for 3mo to May is 0.26% above 3mo average for the period before March and 2.25% above same reading for 2010.
• On the net, strong showing in Traditional Sectors in terms of volumes.
  

What about the Turnover indices:

• Turnover index for Manufacturing Industries rose to 99.6 in May from 98.2 in April (and increase of 0.91% yoy and 1.43% mom). This seems to contradict recent PMIs showing compressing profit margins in recent months, though PMIs are leading indicators while the reported indices reflect activity at the time. Turnover in Manufacturing is now 7.06% below the same reading for 2007. 3mo average through May 2011 is 2.79% below that for the 3mo period through February 2011 and 2.48% above the comparable period in 2010. The change during 2011 so far is not enough to attain the 12mo high of 102.1 achieved in January 2011, though we are moving in the right direction.
  
• Turnover index for Transportable Goods industries also rose from 97.8 in April to 99.2 in May, registering a mom increase of 1.43%, a 3mo rise of 0.61% and a yoy increase of 1.02%. Relative to may 2007, index now stands at -8.18%. 3mo average has moved down 2.67% relative to 3mo through February 2011 and is up 2.34% yoy.
• Finally, New Orders Index rose strongly from 98.4 in April to 100 in May, up 0.20 on 3mo ago, +2.35% yoy and +1.63% mom. Index is now down 7.42% compared to same period in 2007. 3mo average through May fell 3.58% compared to 3mo average through February, but is up 2.47% on a year ago.

To sum, up, slower growth rates in Turnover Indices and New Orders index, as well as contracting indices in volumes for Manufacturing and and Modern Sectors, plus slower growth in Volume index for All Industries suggest that overall PMI signals of slower growth through May are holding. Traditional industries bucked the trend here, but we can expect further small slowdowns in June and July. Growth, to put it briefly, is flattening out in the sector.

10/06/2011: Industrial turnover and production - April 2011

Industrial Production and Turnover data was released today for April, indicating the overall activity in the manufacturing sector and the broadly defined sources of this activity.

In line with this, I went back and linked - re-based - 2006 and 2007 CSO data to current base to show some comparatives to pre-crisis dynamics.

Here are the highlights:

• Manufacturing activity was up 4.09% on annual basis, compared to April 2010. Monthly increase was 2.24%. However, Manufacturing activity was down 1.44% on 3 months ago and 4.16% on April 2007 (pre-crisis). The seasonally adjusted volume of industrial production for Manufacturing Industries for the 3mo period to April 2011 was 1.8% lower than in the preceding 3mo period
• All industries activity was up 1.32% mom and 2.67% yoy, but down 2.095% on 3 months ago and down 5.33% on April 2007.
• Modern Sectors posted a volume increase of 2.52% yoy and 1.41% increase mom. The activity in Modern Sectors is up 4.79% on April 2007, but is down 2.4% on 3mo ago.
• Traditional Sectors activity was up 1.39% yoy and 1.15% mom, but down 0.57% on 3mo ago and a whooping 18.05% on April 2007.
• It is interesting to note that Modern Sectors are positively correlated with Manufacturing output to the tune of 0.772 for the full sample (January 2006-present), but this correlation grew to 0.863 for the sub-sample covering the crisis (since January 2008) and continues to grow today - up to 0.926 for the sub-sample since January 2010.
  
• In terms of Modern Sectors influence on All Industries volumes, the same relationship holds, with full sample correlation of 0.713 rising to 0.812 for the crisis period and to 0.887 for the period since January 2010.
• The predominant role of Modern Sectors in driving Irish Industrial production is contrasted by a very modest role played by Traditional Sectors, where correlation with All Industries has declined from 0.416 in the full sample since January 2006, to 0.290 in the sub-sample covering the crisis since January 2008, to 0.142 for the sub-sample since January 2010.
  

Chart to illustrate:
Of course, the driving factors discussed above imply that:

• The collapse of construction and real estate investment exposed the extreme degree of indigenous industries dependence on these areas of economic activity;
• MNCs-dominated modern sectors, free of constraints of domestic demand, have been experiencing strong recovery. Manufacturing has regained pre-crisis peak of 109 (attained in 2007) back last year (reaching index reading of 110.1 for the year), which also pushed All Industries index a notch above pre-crisis peak. Modern Sectors have shot to new historic highs in 2010, reaching 124.7 index reading, compared to pre-crisis peak of 111.2 attained in 2007. It is worth noting that Modern Sectors have recovered from the recession back in 2009, having posted volume of production index reading of 112.7 - above the pre-crisis peak.
• These trends continued in April 2011, as CSO notes, since "the most significant changes [in Volume of Production Indices] were in the following sectors: Basic Pharmaceutical products and Preparations (+11.3%) and Beverages (9.9%)... The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed an annual increase in production for April 2011 of 2.6% and a increase of 1.4% was recorded in the “Traditional” Sector.

Next, consider turnover indices:

• Turnover in Manufacturing sector in April registered index activity at 95.9, which is 3.01% above March activity and 3.45% above April 2010 activity. However, turnover is 4.29% below that recorded 3 mo ago and 14.40% below April 2007. The turnover in April was also lower than the turnover in any of the months from May 2010 through February 2011
  
• Turnover in Transportable Goods Industries posted index reading of 95.4, which was up 2.69% mom and 3.02% above April 2010 reading. The index was down 4.6% on 3 mo prior to April 2011 and 15.22% below April 2007 reading.
• This suggest that output sales conditions have improved mom (monthly changes in turnover exceed change in volumes), but are still down yoy.

Chart to illustrate:
Lastly, the above chart also shows new orders activity which has risen from 90.7 in March to 95.9 in April for all sectors. However, new orders activity remains slowest for any month since the end of April 2010 through February 2011. New orders index is therefore up 5.73% mom (good news) and 3.79% yoy (also good news), but it is still down 4.39% from 3 mo ago and is down 15.52% on April 2007.

Economics 12/03/2010: Industrial production

If you believe in fairies and elves and the story of the MNCs carrying out Ireland out of the slump driven by collapse of domestic economy, then you are in a recovery, friend.

On an annual basis production for Manufacturing Industries for January 2010 was 2.3% higher than in January 2009 (chart) per CSO’s latest data.The drivers of this change were:

• Computer, electronic and optical products (-37.2% oops)
• Basic pharmaceutical products and preparations (+11.8% - more like it).
  

In other words, really, folks – fewer PCs many more Viagras. Time to pop that vintage champagne out.

Hold on – there’s seasonality here, clearly, plus volatility. So the seasonally adjusted volume of industrial production for Manufacturing Industries for the 3 month period November 2009 to January 2010 was 2.7% lower than in the preceding three month period.

What happened there?

The “Modern” Sector, comprising a number of high-technology and chemical Sectors – all are MNCs led – showed an annual increase in production for January 2010 of 4.8%.

A decrease of 3.6% was recorded in the “Traditional” Sector (the one our folks at L28 wanted to stimulate via expensive borrowing and semi-state companies – good luck extracting here any sort of meaningful returns on ‘investment’).

More significantly, the seasonally adjusted industrial turnover index for Manufacturing Industries fell 1.5% in the three month period November 2009 to January 2010 compared with the preceding three month period. On an annual basis turnover was 8.8% lower when compared with January 2009. This makes me worry – turnover is down output is up and there is no deflation globally. What’s happening? Have falling value of the Euro been impacting the revenue we collect on transfer-pricing from the US? Likely – inputs prices are appreciating with the dollar, output prices are falling with the euro. In the end, less dosh for us.

PS: what do you think these figures are doing to the hopes of the high value-added private sector jobs creation - the one that promises us to deliver 105K new jobs via IDA and another 150K new jobs via FAS/DETE etc 'Innovation frameworks'?

Let me tell you a quick tale: on the day of Taoiseach's launch of the Innovation taskforce report, TCD academics received a 'No' answer to their joint (with Innovation Centre) application for a post of a lecturer in entrepreneurship and innovation. Knowledge economy, it seems, per some decision-makers somewhere, does not need research and teaching in either entrepreneurial aspects of innovation or business aspects of the same. So much for 'commercializable R&D'... Oh, yes, the post was planned to be self-financing via expanded teaching programmes, as far as I am aware.

Unemployment and more

As was widely predicted, December implied unemployment rate (based on Live Register figures) came in at 8.3%. According to CSO:
"The seasonally adjusted Live Register total increased from 277,200 in November to 293,500 in December, an increase of 16,300."

The unadjusted LR came in with a much higher increase of 22,777 - a number that might be actually closer to the reality on the ground, as seasonality adjustments are likely to underestimate the extent of actual jobs destruction in the recessionary economy.

For persons of 25 years of age and over (the prime earners' category), newly unemployed males outnumbered females almost 2:1 - a trend that underpins unemployment growth throughout the year.
Overall, there are now 293,500 seasonally adjusted individuals on the unemployment assistance in Ireland, implying the unemployment rate of 8.3%. However, this assumes static population figures. In reality, it is highly likely that net outward migration from Ireland has actually reduced the size of the available labour force in the country. If so, the actual unemployment rate should be higher than 8.3%.

Whether the actual unemployment rate is 8.3% or 8.5% is a moot point when one considers that we started 2008 with an implied unemployment rate of 4.9%. It is now clear that we are on-trend to reach 12% unemployment mark by the end of 2009 - so much for yet another childishly inaccurate DofFinance forecast of 7.3% unemployment for 2009!

On a bit more encouraging side

Yesterday's CSO data on industrial production has shown some positive signs of life in, it is worth saying, extremely volatile series. Here are some charts:
First chart above shows a robust pick up across the entire manufacturing sector in November. So much for 'uncompetitive' manufacturing story, but do not a massive overall increase in the range of volatility last year compared to 2007.
The second chart shows that most of the November increase can be accounted for by the 'Modern' sectors - aka US multinationals. This is quite interesting as December Exchequer returns have shown a massive (20%) drop in corporate tax receipts, suggesting that increased multinationals' activity was associated with increased transfer pricing. Exchange rate movements - stronger Euro - did not help either, exacerbating the impact of transfer pricing.
Really positive piece of news in on expectations front, with all but two sub-sectors (Basic Chemicals and Office Machinery & Computers) shown upward trending new orders for 2008.

These charts re-enforce the argument that I have been making for years now - Ireland Inc's productivity is wholly dependent on one source for growth: foreign firms. Forget the talk about somehow intrinsically better quality of our labour force and regulatory regimes. The formula for any real success in 1990-2007 in this country is: get them in with low taxes, for there is no other reason for them to be here.