7/2/17: There's Zero Growth in Irish Patentable Innovation & Research Outputs

In a recent post on Irish patents filings and applications with the EPO, I showed that:

1. Irish R&D and innovation performance - as reflected by patents data - is hardly impressive, with the country ranking 14th in the sample of 50 countries as an origin for EPO Applications;
2. There has been no material improvement in Irish standing in the data in recent years, compared to trends.

Some of the readers have taken me to task on the second point, despite the fact that my evidence (based on EPO data) shows no gains in Irish patenting activities with the EPO in terms of both applications and filings, and in comparative terms as a share of both in the total number of EPO applications and filings. 

So I took a different exercise, plotting a relationship between average levels of filings and applications (combined) across 2006-2008 period against the same for 2014-2015 data. 

Not surprisingly, Ireland comes smack in the middle of the distribution and right on the regression line, implying that:

1. Ireland's patenting performance is to the upper range of the overall distribution of 50 countries, but it is at the bottom of this sub-group of top performing countries. In fact, Ireland's position is statistically indistinguishable from 'mediocre' or 'average' group of countries. 
2. Ireland shows only tiny growth in applications between 2006-2008 period into 2014-2015 period (see Ireland's point position just slightly above 45 degree line), which is statistically indifferent from zero growth.
3. Once we control for the factors that drive global trend in patents (blue regression line), Ireland shows no statistically identifiable growth (Ireland's point is bang on the regression line).

Yes, patents are not the only measure of innovation and R&D, but, being the core part of STEM-focused research, they are the main measure of innovation and R&D, because patents data omits only one form of innovation - that linked to software. Now, software innovation is important, and Ireland may or may not be doing well in this sub-sector, but STEM research is based not on software innovations, but on 'hard' patents. And Ireland does not brand itself as 'Software-only Innovation Hub'. In fact, Ireland spends (as a State and economy) more on STEM innovation than on software innovation, so the key focus on Irish policies is, once again, measurable via patents.

Until we get 2016 data to update the above analysis, I rest this topic discussion.

5/2/17: European Patents and Ireland's 'Knowledge Economy' Myths

Irish policymakers are keen on promoting Ireland as a technology and R&D centre of excellence, often claiming the country is a ‘Knowledge Economy’, a ‘Data Island’, a ‘Europe’s Tech Capital’ and so on. While catchy, these tag lines are far from reality, and, in fact, represent an empirically dubious proposition. 

To establish this claim, consider the European Patent Office data on patent filings and approvals, with the latest data set covering the period of 2006-2015. 

As chart below clearly shows, Ireland is far from being a significant source of patent filing in Europe, despite the fact that many patents from Ireland are filed by the U.S. and other multinationals, including a score of foreign companies that choose to tax-invert into Ireland. The EPO data, in fact, fails to control for this distortion. Still, even with those companies filings counted as ‘Irish’ by origin, Ireland ranks 14th in a key metric of the rate of European Patent Applications per million of inhabitants. 

Worse, Irish rate of patent applications (119 per 1 million of inhabitants) is below the mean for the sub-sample of European states (including EU28 states and other countries within the EEA). Statistically, Irish rate of patent applications per inhabitant is not distinguishable from the rates filed by Italy and Slovenia, and is well below the rate recorded for France, Belgium, Austria, Germany, Denmark, Finland, Sweden and the Netherlands. Irish numbers are also statistically indistinguishable from the global average - the average that includes non-European states’ filings. It is worth noting that the data set includes other countries, that similar to Ireland serve as major tax optimnization locations for R&D and IP, e.g. Luxembourg and the Netherlands. However, even controlling for these states, Irish data does not shine beyond being average.

In absolute terms, Irish patent filings and applications with the EPO have trended up in 2006-2010 period, but have since flat-lined (on trend) for filings and declined (on trend) for applications. 

In addition to the chart above, combined filings and applications for EPO patents by Irish-origination stood at 1,325 in 2015, down on 1,364 in 2014 and down on 1,356 average for 2008-2011 period. While data can be interpreted in a number of ways, there is clearly no indication of an improving trend in either filings or applications over the recent years. This comes on foot of aggressive acceleration in tax inversions into Ireland in previous years - an acceleration that brought into Ireland a range of large R&D-intensive companies.

Consistent with the above, Ireland’s share of all European Patent Office filings and applications has declined, on trend, in recent years, as evidenced by data presented in the chart below:

As the chart above shows, Ireland accounts of just 0.266% of all EPO patent filings and 0.364% of all EPO patent applications. Separately reported data for patents approvals shows Irish share of all patents granted by EPO to be just 0.395%. The number is laughably negligible by Europe-wide standards and is massively out of line with Irish share of European GDP. However, these numbers are consistent with the simple fact, also highlighted by EPO data, that Ireland fails to register in the top tier of generators of patents in any of the sectors tracked by EPO. 

In summary, Ireland is far from being a powerhouse for R&D and knowledge economy activities as measured by a key research output measured by European authorities. 

26/8/2014: On that 'tax optimising' shift in Pharma Sector

To clarify my previous comment (see post: http://trueeconomics.blogspot.ie/2014/08/2682014-irish-trade-in-goods-h1-2014.html), here is the chart showing 6mo cumulative evolution of the ratio of exports to imports for pharma and pharma-related sectors:

You can see the three recent trends in exports ratio to imports ratios:

1. Based on purple line, there is one regime operating through H1 2008 - with shallow decline in ratio of exports to imports roughly from H2 2002 through H1 2008 pointing to relative rise of imports in overall trade. This is the consumption and construction boom. In H2 2008 we have a sharp rise in exports/imports ratio peaking at H2 2010: the period of collapsed imports relative to exports. Thereafter we have a decline in the ratio.
2. Based on Organic Chemicals (blue line) and Other chemical products (green line) we have two regimes: between H1 2004-H1 2005 and H2 2008 the two lines are broadly counter-moving. Red line includes some of the inputs into the blue line, but also domestic consumption component. This does not directly imply, but can indicate, rising amount of imports of inputs and rising (even faster) amount of outputs in the pharma sector. The evidence is weak, so not to over-draw any conclusions, it should be qualified. The second period - post H2 2006 through H1-H2 2009 we have a flattening and then peaking in exports of pharma relative to imports of pharma inputs. This is aggressive booking of profits (margin between exports and imports).
3. After H1-H2 2009 we have rapid decline in the ratio of exports to imports in pharma sector itself, and more gentle decline in related sectors. This, with caveats once again, can signal re-balancing of tax and operational efficiencies away from Ireland being a profit-booking centre to Ireland becoming a cost-booking centre.

There are many various schemes for optimising tax exposures for pharma firms, as well as other MNCs. Based on the aggregate data, it is virtually impossible to tell, which one is operating across the entire sector. But one thing is very clear from the above data - value added in the broader Organic Chemicals sector is collapsing. Worse, it is collapsing at a faster rate between H2 2013 and H1 2014 than in any period since H1 2009. It would have been good if the CSO were to publish more detailed data on this and produce an in-depth study. Somehow, I doubt they can and/or will, however.

10/3/2014: Industrial Production & Turnover: Q4 2013 & January 2014

CSO released Industrial Production & Turnover figures for January 2014 back last week, and here is an update.

Obviously, we all are familiar with the fact that Manufacturing is booming once again, thanks for PMI signals, but... table above is not exactly cheerful, is it? On an annual production volumes data, activity is down 1.4% and turnover is up only 0.2%. On 3mo basis, production volumes are up just 0.2% and turnover is down massive 5.0%. Ugly...

Let's take the following experiment. Irish industrial production data (monthly series) is pretty volatile. So instead, let's take a look at quarterly data and augment this with the latest available data for running quarter (so for Q1 2014, let's take the only data currently at hand, that covering January 2014). Furthermore, let's look at seasonally-adjusted series to strip out even more volatility. Here are some charts with quick commentary.

Traditional Sectors:

Trend down, but January 2014 is above trend.  Beyond that:

• Current running quarter is 3.44% up on Q4 2013 and Q4 2013 was up 0.35% on Q3 2013 on volume basis. Current year on year is +6.12% on volume basis. So things might be improving.

Manufacturing:

No above luck with Manufacturing: trend down and we are below trend. Beyond that:

• By turnover, current Q1 2014 is down 1.37% on Q4 2013 and Q4 2013 was down 3.47% on Q3 2013. Year on year, current is down 2.40%, while Q4 2013 was down 1.76% y/y.
• By volume, current Q1 2014 is up 0.1% on Q4 2013 and Q4 2013 was down 1.68% on Q3 2013. Year on year, current is down 1.22%, while Q4 2013 was down 0.66% y/y.

Do tell me where those PMIs are now?

Worse, you can't really blame Pharma and Chemicals for this alone. Trend in this sector is down, and we are below trend, but Q1 2014 so far showing a slight uptick"

• By turnover, current Q1 2014 is down 4.36% on Q4 2013 and Q4 2013 was down 10.19% on Q3 2013. Year on year, current is down 10.60%, while Q4 2013 was down 3.54% y/y.
• By volume, current Q1 2014 is up 1.39% on Q4 2013 but Q4 2013 was down 5.98% on Q3 2013. Year on year, current is down 2.05%, while Q4 2013 was down 1.58% y/y.

Things are ugly in Pharma, true. But this is not the sole driver of manufacturing.

Modern Sectors aka MNCs that are, allegedly, supposed to benefit from the global upturn:

Trend down, series below trend, shrinking still:

• By volume, current Q1 2014 is down 0.35% on Q4 2013 but Q4 2013 was down 4.78% on Q3 2013. Year on year, current is down 3.52%, while Q4 2013 was down 1.62% y/y.

Unpleasant. 

10/1/2014: Irish Industrial Production & Turnover: November 2013

Production for Manufacturing Industries for November 2013 in Ireland was up 13.0% on October 2013 and on an annual basis production increased by 15.9%. Turnover rose 1.2% in November 2013 when compared with October 2013 and an annual basis turnover increased by 0.7% when compared with November 2012.

These are big numbers. Which is good news. But they come with huge volatility in the series overall, so better comparative is on 3mo rolling basis. Here things are less pleasant:
- The seasonally adjusted volume of industrial production for Manufacturing Industries for the three months September 2013 to November 2013 was 0.1% higher than in the preceding quarter.
- Year on year All Industries production indices for 3 months period through November were still up robustly by 7.3%
- Turnover was 0.2% lower.

Per CSO: "The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly increase in production for November 2013 of 13.4%. There was a monthly increase of 0.4% in the “Traditional” Sector."

Good news here is that y/y figures for production are up on a 3mo basis. Chemical and pharmaceuticals sector posted 21% rise. Basic metals a gain of 23.9%. But Food products fell 0.3% and Beverages fell 8.3%. Also, Computer, electronic, optical and electrical equipment production shrunk 16.2%.

Poor news came on q/q dynamics side. For September-November 2013, compared to 3 months period through August 2013, Capital goods production was down 3.6%, Intermediate goods production was up just 0.2%, Consumer goods production fell 1.0% with Durable Consumer Goods output down 30.4% and Non-durable Consumer Goods up 4.8%.

Full details here: http://www.cso.ie/en/media/csoie/releasespublications/documents/industry/2013/prodturn_oct2013.pdf

Summary:

11/2/2013: Irish Industrial Production & Turnover: December 2012

Still catching up with data updates following a busy week lecturing.

Last week CSO issued data for december 2012 on Industrial Production and Turnover. Here's the detailed breakdown.

On Production volumes side:

• Index of production in Manufacturing Sectors rose to 112.0 in December 2012 up 11% on 100.9 in November 2012. Year on year index is up 2.85% - anaemic, but at least positive. 
• However, compared to December 2007 the index is still down although insignificantly at -1.72%. The issue here is that de facto this means that Irish Manufacturing Sectors are static over the last 5 years. 
• 3mo average through December is down 3.77% on 3mo average through September 2012 and is 7.15% down on 3mo average through December 2011. Thus, longer term dynamics, smoothing out some of the m/m volatility are not encouraging. 
• On shorter end of dynamics, however, things are slightly better: December reading is 112 and it is well-ahead of 6mo MA of 106.75 and 12mo MA of 108.99.
• Index of production in All Industries also improved in December to 108.8 up 1.58% y/y and 8.47% m/m.
• Compared to December 2007 the index is down significantly at -4.26%, which again shows that Industrial activity in Ireland has fallen relative to 5 years ago or at the very least - has not risen.
• 3mo average through December 2012 is 3.83% behind 3mo average through September 2012 and 7.01% below 3mo average through December 2011.
• As with manufacturing, shorter end of dynamics is more positive with December 2012 reading at 108.8 ahead of 6mo MA of 105.12 and 12mo MA of 107.19. 
• Modern sectors activity rose strongly at 9.3% m/m to 120.6 in December 2012, although y/y rise was much weaker at 1.86%. 
• The index is ahead of December 2007 by a marginal 1.82%.
• 3mo average through December 2012 is 7.68% below 3mo average through September 2012 and 9.61% below 3mo average through December 2011.
• Shorter dynamics are not too positive: the current reading of 120.6 is only marginally ahead of 119.82 6mo MA and is below 12mo MA of 124.05. 
• All dynamics in the Modern Sectors show steep falloff in Pharma activity.
• Lastly, Traditional Sectors activity returned to contraction in December, falling to 86.9 (-1.3% y/y and -1.25% m/m). The index is now 15.35% below where it was in December 2007. 3mo average through December 2012 is 1.73% down on previous 3mo period and is 1.37% down on same 3mo average in 2011. Worse than that, after posting a surprise uplift in November, the index is now running only slightly ahead of 6mo MA of 85.5 and 12mo MA of 85.13.
• So on the net, good news is that outside Traditional Sectors time series in volume activity are trending up in last two-three months. Bad news is - we are still off the levels of activity consistent with 2011 and are way off from regaining any sensible growth on 2007.

Chart to illustrate:

On Turnover Indices side:

• Manufacturing Sectors turnover fell from 101.1 in November 2012 to 97.0 in December 2012, down 3.10% m/m and down 10.76% y/y, both steep declines. Compared to the same period of 2007 the index is now down 9.5%. 3mo average through December 2012 is down 4.35% on 3mo average through September 2012 and is down 6.36% y/y.
• This index is pretty volatile m/m but overall, 6mo MA is at 98.93 and 12mo MA at 98.33 - both ahead of December monthly reading.

New Orders sub-index for all sectors is trending flat over the recent months (as per chart above) reaching 96.9 in December 2012, down from 100.1 in November 2012, so the index is down 3.2% m/m and it is down even more significant 10.9% y/y. Compared to December 2007 the index is down 11.6%. On 3mo dynamics the index is down 5.04% period on period and 6.7% y/y.

I will blog separately on dynamics in the phrama sector next.

7/11/2012: A patent cliff or a temporary slide?

In the previous post, looking at the top-line figures for Industrial Production for Ireland, I have promised to look more closely at the dynamics underlying the largest singular exports (goods) driver - the Pharma sector - Basic Pharmaceutical Products and Preparations (BPP&P) sector. Here are some numbers and trends.

An excellent analysis of this is also available from Chris Van Egeraat of NUI Maynooth (link here).

Let's start from the top. Throughout, I use the current figures for September that are subject to potential future revisions.

Production volumes:

• Index of production volume in Basic Pharmaceutical Products and Preparations sub-sector fell from 165 in August to 107 in September - a decline of 35.15% m/m and down 31.76% y/y.
• Compared to 2010, the index is now down 29.47%, compared to the peak value for January 2010-present period the index is down 42.41%.
• Back in September 2011, the index rose 3.36% y/y, so the swing in growth rates is extremely sizable.
• The declines are much shallower if we look at 3mo MA readings which a more likely to be reflective of the longer trends: for the latest 3 months through September 2012, the index average is down 9.27% compared to the 3 months period through June 2012. The index is also down7.02% compared to 3 months period through September 2011 and 5.93% down on its reading for the period through September 2010. Back in 2011, 3 months average through September rose 0.57% y/y. 

Turnover:

• Turnover index fell from 136.4 in August to 105 in September 2012 a decline of 23.02% m/m and 27.44% drop y/y.
• Compared to September 2010, the index is now down 29.72% and compared to the all-time peak activity for January 2010-present period, the index is down 40.10%.
• Back in September 2011 the index posted a decline of 3.15% y/y.
• Again, looking at 3mo averages through September 2012 there was a rise in the index of 2.0% compared to 3mo average through June 2012, but a decline of 8.82% on 3mo average through September 2011. Compared to 3mo average through September 2010, current index reading 3mo average is down 11.85%. This contrasts with index 3 mo average through September 2011 declining just 0.9% y/y.

Chart:

There is clearly a steep drop off in both series. And this falloff has a significant impact on our exports and overall industrial sectors activity. 

However, the series are volatile. For example, for January 2010-present, standard deviation in the turnover index for BPP&P sector is 11.82, against standard deviation for manufacturing sector at 3.41. In terms of volume of activity, index standard deviations are 12.61 and 4.42 for BPP&P sector and manufacturing, respectively.

Nonetheless, the drops in September amounted to 4.6 STDEV in Volume and 2.66 STDEV in Value - both are sizable.

A comparable drop in Volume in November 2011 came in at:

1. Shallower m/m change of 25%;
2. Was on foot of historical high (August 2012 was the third highest reading in Volume terms) and
3. Coincided with a monthly rise, not fall, in the Turnover index activity.

Thus, one has to be cautious when attributing the index moves in September 2012 to either volatility or the specific long-term trend change, such as a patent cliff (again, the note linked above from Chris Van Egeraat is spot on in this point).

However, one must be cognizant of the signifiant positive links between activity in the BPP&P sector and overall Manufacturing activity. Chart below illustrates the strength of that relationship:

One has to be also significantly concerned with the fact that we have coincident drops in Turnover and Volume, so the price effects seem to be going the same direction as the volume of activity. In general, there is virtually no meaningful relationship between sector volume and turnover. Strengthening of the link between turnover and volume can be reflective of a structural slide in the overall activity.

As usual, caution is warranted in interpreting the immediate and provisional figures. However, 'slips' like this do matter - both in terms of their immediate impact on GDP and (less so) GNP, and in the light of what we do anticipate - the reduction in overall sector activity in the near future due to patent cliff.

6/11/2012: Irish Industrial Production & Turnover: September 2012

There has been a massive, extremely disturbing, albeit alltogether not un-predictable fall off in manufacturing activity in Ireland over September 2012. Here's the CSO statement:

"Production for Manufacturing Industries for September 2012 was 13.9% lower than in August 2012. On an annual basis production for September 2012 decreased by 13.7% when compared with September 2011.

The seasonally adjusted volume of industrial production for Manufacturing Industries for the quarter period July 2012 to September 2012 was 4.5% lower than in the preceding quarter.

The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly decrease in production for September 2012 of 22.4%. The most significant change was in Basic pharmaceutical products and preparations with a decrease of 35.2%.

There was a decrease of 1.3% in the “Traditional” Sector.

The seasonally adjusted industrial turnover index for Manufacturing Industries decreased by 5.7% in September 2012 when compared with August 2012. On an annual basis turnover decreased by 4.5% when compared with September 2011."

More on underlying dynamics:

• Volume of Manufacturing output shrunk 13.73% y/y and 13.88% m/m. Compared to September 2007, index reading is down 13.89%. Q3 2012 reading is down 4.8% q/q and down 2.82% y/y.
• Manufacturing activity (in volume terms) now stands at the levels last seen back in December 2009 and is down 2.6% in 2005 levels.
• 6mo MA through September 2012 is at 110.78, virtually indistinguishable from 12mo MA of 110.98.
• Volume index for All Industries is now at 96.8 - the level last seen between November and December 2009. The index is down 12.71% y/y and 12.64% m/m. Q3 2012 reading is down 4.52% q/q and down 3.10% y/y.
• 6mo MA is now slightly below 12mo MA (108.75 v 109.10).
• The index is at 3.2% below 2005 levels of activity.

• Modern Sectors volume of activity index has fallen to 105.0 in September, down 18.03% y/y and 22.45% m/m. Activity has fallen to the lowest level since November-December 2009 and compared to September 2007 the index reading is down 8.96%. 
• Q3 2012 index is down 5.96% q/q and down 1.60% y/y.
• 6mo MA (127.07) is identical to 12mo MA.
• Traditional sectors fall-off was less steep, but the index of volume of production here suffered second consecutive monthly decline. The index is down 5.01% y/y and down 1.30% m/m to reach 83.5 reading, lowest since January 2012. 
• Traditional sectors volume of production is down 22.53% on September 2007 and down 16.5% on 2005 levels of activity.
• Q3 2012 reading is 1.33% below Q2 reading and down 6.15% y/y.
• 6mo MA (84.93) is below 12mo MA (85.4).

As the result of the above changes, the gap between Modern sectors activity (volume) and Traditional sectors activity has narrowed dramatically to 21.5 ppt in September against 50.8 ppt in August.

Turnover data signaled narrower reductions in activity, suggesting that some MNCs have accelerated transfer pricing in light of higher producer price inflation (as signaled by recent PMIs):

• Manufacturing turnover activity fell to 97 in September, down 4.53% y/y and down 5.73% m/m. 
• Compared to the same period of 2007, turnover is now down 10.08%.
• Q3 2012 reading is up 3.70% q/q and up 0.36% y/y - once again due to improved price inflation.

New orders index reading slipped to 97 in September, down 3.96% y/y and down 6.55% m/m. Compared to same period 2007, the new orders activity is down 11.31%. Q3 2012 new orders average activity was up 3.59% q/q and up 1.44% y/y. 6mo MA, nonetheless is almost flat at 99.35 compared to 100.00 for 12mo MA.

Employment indices have slipped across a broad range of sectors in Q1 2012 - the latest for which data is reported. Modern sector employment fell to 63,500 in Q1 2012 against 67,100 in Q4 2011. Chemicals and pharma sector employment actually rose to 43,800 in Q1 2012 against 43,300 in Q4 2011, while Computers, electronic and optical products and equipment employment fell from 23,800 in Q4 2011 to 19,700 in Q1 2012. Overall industrial employment in Ireland fell from 201,200 in Q4 2011 to 192,700 in Q1 2012.

Volumes of industrial production in Basic pharmaceutical products and preparations fell 31.8% in September 2012 y/y and were down 35.2% m/m. In turnover terms, activity was down 23.1% m/m and down 27.5% y/y.

I will blog on this in more detail later tonight, so stay tuned.

6/10/2012: Irish Industrial Production - August 2012

Per CSO:

• Production for Manufacturing Industries for August 2012 was 0.7% lower than in July 2012. On an annual basis production for August 2012 increased by 0.2% when compared with August 2011.
• The seasonally adjusted volume of industrial production for Manufacturing Industries for the three month period June 2012 to August 2012 was 1.8% higher than in the preceding three month period.
• The “Modern” Sector, comprising a number of high-technology and chemical sectors, showed a monthly increase in production for August 2012 of 5.1% and there was a decrease of 0.9% in the “Traditional” Sector.
• The seasonally adjusted industrial turnover index for Manufacturing Industries decreased by 0.1% in August 2012 when compared with July 2012. On an annual basis turnover increased by 0.2% when compared with August 2011.

Here are some more detailed stats and dynamics:

• Volume of total Manufacturing output was down 3.43% in August compared to same month in 2007 (pre-crisis). 3mo average through August 2012 was up 1.78% on 3mo average through May 2012 and 3.75% ahead of the 3mo average through August 2011.
• August reading for Manufacturing marks the first m/m decline since February 2012.
• Volume of production in All Industries in August 2012 was down 4.68% on same period in 2007. 3mo average through August is 1.75% ahead of 3mo average through May and is 2.72% ahead of 3mo average through August 2011.
• Both Manufacturing and All Industries indicate improved 3mo averages as consistent with modest improvement in output dynamics.
• Volume of activity in Modern Sectors posted the highest reading since October 2011 and the second highest reading since the beginning of comparable series (January 2006). 3mo average through August 2012 is now 1.26% ahead of the 3mo average reading through May 2012 and is 6.59% ahead of the 3mo average through August 2011. Very strong performance in the sector.
• In Traditional Sectors, however, volume of activity fell 14.17% y/y and is now down 20.05% on August 2007 level of activity. 3mo average through August 2012 is down 1.78% on 3mo average through May and is down 4.34% on 3mo average through August 2011.

Chart to illustrate:

• As the result of the above trends, the gap between indices measuring the Volume of production in Modern and Traditional sectors has now widened to 51.5 - the highest reading since the all time record of 56.6 in October 2011.

It is worth noting that Traditional manufacturing sectors are usually associated with higher labour intensity than Modern sectors, implying the disconnection between improvements in overall Manufacturing index (volume) activity and the likelihood of jobs creation acceleration.

Turnover indices:

• Manufacturing sector turnover dipped marginally in August (-0.1% m/m) but is ahead, also marginally, on the annual basis (+0.19%). The index is down 6.9% on August 2007. 3mo average through August 2012 is 5.28% ahead of the 3mo average through May 2012 and is 3.29% ahead of the 3mo average through August 2011.

Lastly, New Orders index:

• New Orders index hit the highest reading in 2012 in August, up 3.4% y/y and 1.16% m/m, although the activity is still down 6.8% on August 2007. 3mo average through August 2012 is 5.5% ahead of 3mo average through May 2012 and 3.9% ahead of the 3mo average through August 2011.

The overall activity in the industrial production is clearly stabilizing at the recovery levels, but as noted above this is solely driven by the activity in Modern sectors.

29/8/2012: H1 figures for trade show effect of the patent cliff

A very good analysis of Irish external trade figures for trade in goods and the effect of the patent cliff on trade balance from Dr. Chris van Egeraat, Department of Geography and NIRSA, NUI Maynooth in FinFacts today: link here. 

Readers of this blog and my (now sadly defunct) Sunday Times column would have spotted my interest in the subject. Dr Van Egeraat presents H1 figures for 2012 - first available this month - to show the effect.

15/3/2012: Irish Industrial production & Turnover for January 2012

Industrial production & turnover figures are out for January 2012. CSO headline: "Industrial Production increased by 0.7% in January 2012".behind the headline, things are not so rosy. Here are the details.

Industrial production index for Manufacturing rose in volume terms from 109.6 in December 2011 to 110.3 in January 2012 - that's on of the ca 0.7% increases mom. Series are extremely volatile, so stripping short-term effects:

• Yoy index is down 0.18%
• Compared to same period in 2007 index is down 3.35% - implying that with all records busting exports, industrial production volumes in Manufacturing remain below pre-crisis levels.
• Compared to 2005, manufacturing activity is only 10% up
• Comparing 3mo average for Nov-2011 - January 2012 to 3mo average for Aug 2011-Oct 2011, the index is down 7.5%
• Comparing last 3mo average to same period a year ago, the index is down 2.9%

Still, good news, index did not fall in January.

All Industries index increased from 107.5 in December 2011 to 108.3 inJanuary 2012 - the core 0.74% rise, but:

• Yoy index is down 0.5% and it is down 4.2% on January 2007
• Comparing 3mo average for Nov-2011 - January 2012 to 3mo average for Aug 2011-Oct 2011, the index is down 7.4%
• Comparing last 3mo average to same period a year ago, the index is down 3.2%
• In 7 years, Industrial output rose by just 8.3 cumulative in volume

Modern Sectors fared much better - in monthly terms the index went up 4.9% in January 2012, and year on year the index is up 4.1%. That said:

• Comparing 3mo average for Nov-2011 - January 2012 to 3mo average for Aug 2011-Oct 2011, the index is down 9.5%
• Comparing last 3mo average to same period a year ago, the index is down 3.2%
• In 7 years, Industrial output rose by just 27.2% and since January 2007 the index is up 8.5% cumulative in volume

So some shorter-term pain, but overall, nice performance. Of course the trend (as shown in the chart below) is clear-cut and strong.

Traditional sectors continued to take the beating: down from 88.7 in December to 82.2 in January - a mom drop of 7.4% - the steepest in 4 months. The things are bad:

• Yoy volume of production in Traditional Sectors is down 8.2%
• Comparing 3mo average for Nov-2011 - January 2012 to 3mo average for Aug 2011-Oct 2011, the index is down 6.1%
• Comparing last 3mo average to same period a year ago, the index is down 4.2%
• In 7 years, TraditionalSectors volume fell 18% and since January 2007 the index is down 22.9% cumulative in volume

Relative contribution of Traditional Sectors to the economy compared to Modern Sectors is shrinking and the rate of contraction accelerated in January 2012, as shown in the chart below:

Things are worse on the turnover indices side with price deflation took bites out of the value of our economic activity:

• Manufacturing sectors turnover fell from 107.8 in December 2011 to 98.1 in January - a decline of 9% mom. It is now down 3.8% yoy and 14.3% below January 2007. The index is down 2% on 2005. Over last 3 months the index actually up on average 2.8% compared to 3mo average for August-October 2011 and 5.0% above the index reading a year ago, back in November 2010-December 2011.
• Other broader sector - Transportable Goods Industries turnover also fell mom - down 8.8% and is down 3.9% yoy. The pattern of changes is pretty identical to that in Manufacturing.

Looking forward, New Orders index for all sectors came in at a disappointing 98.5 - the lowest reading since April 2011 and 3.7% below January 2011 levels. The index is down 8.9% yoy and 15.8% on January 2007. The historical trend remains firmly downward, but shorter-range trend since january 2010 is strongly up. 

Yoy, New Orders declined 1.9% in Food Products (mom decline of 5.7% in January), rose 5.0% in Beverages (mom rise of 1.2%) and increased 5.5% in Chemicals and Chemical products (+2.7% mom). There was a huge fall off in New Orders in Basic Pharmaceutical Products and Preparations - down 6.9% yoy and 26.4% mom. Computer, electronic and optical products are down 4.3% yoy and 1.2% mom. Do note the patent cliff sighted above - dramatic - and will translate into trade figures as well. Please keep in mind - Government has been saying they have prepared for this.We shall see once trade data & QNAs come in for H1 2012.

So some headline improvements, but overall, weak data.