Industrial production in Ireland is down

Given that we are in Fiscal Compact mode here on the site, I thought I’d make a point about industrial production in Ireland. Today’s monthly release of the Census of Industrial Production (.pdf) shows up a few interesting features of the Irish economy. The CSO report that the seasonally adjusted volume of industrial production for Manufacturing Industries for the first quarter of 2012 was 5.2% lower than the preceding quarter, but the seasonally adjusted industrial turnover index for Manufacturing Industries increased by 3.2% in March 2012 when compared with February 2012 and actually increased on an annual basis.

I thought I might dig into this a little. The chart below shows monthly data from 2007 on industrial production for the ‘modern’ sectors of chemicals, pharmaceuticals, recording media, and medical devices, and individually the key exporting pharmaceutical and chemical sectors. Seasonally adjusted and indexed to 2005, then, we have the following:

Which shows that, for these key sectors on a seasonally adjusted basis there has been a marked drop since the end of last year. Before we all go shorting Ireland just yet though, to put these figures in a bit more context, here’s the same series averaged annually, with the last period averaged quarterly for 2012.

There’s still a decline, but it’s not quite the patent cliff Frank Barry has been highlighting recently. Definitely a series to watch however. Here’s the turnover statistics for the two chemical sectors, they don’t produce one for the modern sector:

We can clearly see more of a drop , but it’s a bit too soon to tell where this series is headed. Again, one to watch.

By Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

14 replies on “Industrial production in Ireland is down”

Its because Ireland has never been sovergin ( the 1980s CB was just pretend like – so that we could integrate with the continent) that we have to game these various Industries that transfer some excess to the economy – helping to sustain the unsustainable.

The entire Irish Industrial fabric is a absurdity and a direct function & outcome of external money power.
The IDA functions as our own Central Bank if you will – the elite of the elite…..its pathetic really.

Stephen, my understanding is that there is a classification issue with computer software. In the past, software was a manufactured product as it was delivered to the customer as a physical good, i.e disks etc. Most software is now delivered electronically and as such is deemed to be a service.

How has that change been reflected by the CSO? I am aware that up to 30th June 2010 the Revenue continued to regard software as a manufactured good for the purposes of the 10% rate, even when it was delivered electronically.

Service exports have continued to grow. While much of that is perhaps the sales of advertising by Google & Facebook, might it also involve a degree of re-classification of softeare?

Interesting data on fall in exports representing similar falls I’m guessing across the EMU. Are there figures specific to manufacturing, production targeting the local economy? I’m sure bigger falls would be seen there. Figures represent a fall in consumer demand. Outside the euro, rising import prices would stimulate local manufacturing and import substitution. The MNC’s exporting worldwide would be marginally effected.

@The Dork of Cork

Did you know that the last nuclear generator shuts down in Japan this weekend? That’s gotta hurt if you don’t have any oil of your own.

@niall I was aware of the software issue but I’ll check on the other classifications for you.

Its a catastrophe…… the loss of wealth in Japan will kill far more people then the radiation I suspect…. although that is considered a controversial position by many.
I am now far more concerned with Hollande shutting down French Nuke stations which will send a gas price shock wave to these shores.

It will be a German / French one two to our energy sector albeit it a indirect series of blows.
I know its hard to comprehend but our NG power stations are now most of the figgin base load of this country.
2 Sizewell B size stations would cover the summer base load of this island.

But if the UK no longer has the expertise to build stations and the French are building just 1 domestic station over 10 years…. (when EDF was not a limited liability company it was building 2+ a week) then we can forget about such goals.

The demise of Nuclear is directly linked to the full scale privatisation of money as it needs large scale base money or low fiscal debt arrangements working under a stable monetary envoirment.

Not what the euro masters want – as the commercial banks now make most of their money through destabilizing & decapitalizing systems.

Worth noting that EU wide PMI index is ~45 and sliding.

Baad baad newz …

@ Niall

Software preinstalled in PCs and tablets such as the iPad is treated as a component of the device. Software on disks is also classified as recorded media. The bulk of software output is classified as ‘computer services.’

The reclassification of items some years ago do not impact the current data.

@ All

The 5.2% quarterly fall in production is not significant so far and it likely does reflect the end of patent protection for drugs such as Pfizer’s Lipitor cholesterol drug.

It’s insignificant relative to the effective overstatement of output.

Patrick Honohan and Brendan Walsh said in a 2002 paper:

“As one rough indication of the scale of the problem, aggregate GDP in 1999 would be more than 15 percent lower if the output of four industries discussed in the appendix were repriced at ‘shadow’ prices chosen to make the reestimated apparent labor productivity equal to the mean for corresponding industries in other European countries. At these shadow prices, aggregate exports would be 27 percent lower and aggregate industrial production 52 percent lower. The growth rate of GDP would also be lower…”

Link to the 2002 paper here:

Interesting paper and a product of its time I fear.

The authors take a certain delight in the dramatic reduction of Labours share of value relative to capital from 1985 onwards.
They appreciate quite rightly that capital formation will increase because of this phenomena….

But what they fail to grasp is the false price signal this gives to capital…. we are now living with the catastrophic results of this neo- liberal orthodoxy.

Malinvestment on a Titanic scale.

Witness the capital formation graph relative to GDP.
Ireland was always a country with very poor capital allocation as can be seen clearly.
In response to the first oil shock they built Moneypoint – a small rise in energy capital formation can be seen in the early to mid 80s and then a rapid decline again….. to be swapped with Grot.
Why is this I wonder ?
Its bank credit of course…… this is used to sustain demand as wages continue to fall against productivity.
A rise in wages would however force the authorties to build more Moneypoints……..or Sizewell Bs
The country would have had far more redundencey today.

Bank Credit is all about dragging oil from the future into todays world – once you understand that dynamic most other things fit into place.

The beating heart of this global labour arbitrage system was the dash for Gas in the western electricity market & coal use in China.
Very little money is needed relative to credit for this development….(the very opposite of Nuclear)
.which means more money is available for credit grot.

This can be seen quite clearly in the UK from 1990 onwards.

And also somewhat earlier in Ireland (Kinsale Gas Field)

Of course when oil moves to $100 + the entire delicate global supply chain that links these 2 energy systems begins to break down.

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