Irish factories buoyed amid mixed indicators of economic health

Irish-owned factories have fared well in recent months, with output rising despite the cost of living crisis, but Ireland-based multinationals, dominated by pharmaceutical and tech giants, appear to have stalled, new official figures suggest demonstrate.

Data from the Central Statistics Office is the latest to send mixed signals on the outlook for the Irish economy as it, along with the rest of Europe, faces the most uncertain outlook since the banking and housing market crash 14 years ago.

The new figures show that the industrial production of the so-called traditional sector rose by 14.6% yoy in the three months to the end of June, with food production also up.

However, figures show that the ‘modern sector’ dominated by multinationals fell by over 7% over the same period.

Multinational companies played a major role in protecting the state from the economic fallout of the worst Covid-19 crisis in two years. Exports from pharmaceutical, IT and chemical multinationals boomed during the crisis and as their profits soared, the amount of corporation tax paid to the Irish Treasury rose to a record high.

The recovery in the traditional sector is being welcomed, but questions are being raised about how Irish-owned firms, which employ many thousands of workers, will fare if the inflationary crisis continues to affect domestic firms, which are more vulnerable to rising energy costs than multinationals .

The range of indicators and hard data remains mixed.

Treasury returns

Last week’s tax returns for July showed that government revenue continued to rise, which is one of the best indicators of the health of the economy, as data for personal income, VAT and corporate tax receipts are the most up-to-date indicators of the health of the economy.

However, consumer surveys are less positive.

AIB said yesterday that total sales on its cards for the quarter ended June were down 1% from a year earlier and that spending could be impacted by inflation.

“While the data shows some positive elements, it also suggests some consumer caution going into the third quarter given the current inflationary environment, which is likely to impact consumer spending power and attitudes,” the bank said.

Many Irish and international economists are predicting that the economy here will avoid a recession unless Russia cuts off the EU’s gas this winter.

Grain shipments

Meanwhile, the resumption of grain shipments from Ukraine will help contain global food inflation, but other challenges remain.

Bloomberg reported that grain prices in futures markets have fallen to pre-war levels, and the UN’s monthly measurement of food prices has fallen the most since 2008.

That offers some relief to consumers who have faced rampant food inflation since the pandemic began.

Still, the war is putting more pressure on farmers from the US to India to replace crop losses and supplies from Ukraine – a key supplier to poorer countries.