Friday, December 13 12:14:25
New figures released by the Central Statistics Office (CSO) this morning were a lot weaker than we expected, with Ireland recording a seasonally-adjusted merchandise trade surplus of 2,971m in October, 245m lower than Septembers revised surplus of 3,216m (3,193m).
Seasonally adjusted exports were up 0.4pc in the month while imports posted an increase of 6.8pc, which may reflect stronger personal consumer spending. Meanwhile, on an unadjusted basis there was a surplus of 2,882m in October, 260m lower than the surplus of 3,142m posted in October 2012. The cumulative trade surplus in the first ten months of 2013 was 31,794m, 4,406m lower than the total surplus of 36,200m in the same period last year. Comparing October this year with October 2012, the value of exports decreased by 210m (-2.8pc). The main drivers were falls of 177m (-8.3pc) in the exports of Medical and pharmaceutical products and 67m (-4.8pc) in the exports Organic chemicals.
The export sector has been the main driver of Irish economic activity in recent times and will remain the key growth engine for some period to come. Weak global demand has hit Irish exports in the past couple of years, particularly on the merchandise goods side. But there are signs now that the world economy (including the key markets of the United States, Eurozone and UK) is starting to recover, which augurs well for Irish exports in the coming months. This should to some degree help offset the negative drag from the patents expiry issue on certain pharmaceutical products.
The pharmaceutical sector accounts for approximately a quarter of total Irish exports and half of merchandise exports. According to recent research from the Department of Finance, Ireland will continue to feel the negative impact of the patent cliff for some time to come, though the magnitude is unlikely to be as great as was felt in 2012. The most significant drug left to come off patent that is produced here is due to expire in 2016. Furthermore, the headline impact should be offset to an (uncertain) extent by reduced imports through royalty payments.
Overall Irish export growth in goods and services last year was just 1.6pc, well below the growth rates of 5.4pc and 6.4pc in 2011 and 2010 respectively. We are currently forecasting a flat performance for exports in 2013 even allowing for an increase in activity in the latter part of the year, with services up but merchandise down. As regards the merchandise trade surplus, we are now projecting a figure of 38bn this year, down from 42.5bn in 2012 according to Merrion Economics.