Brexit uncertainty blamed as industry is battered
Prolonged uncertainty throughout the course of this year has been blamed for an 8pc annual drop in industrial production.
Irish industrial output contracted by 13.7pc on a monthly basis in August, according to the Central Statistics Office, although the CSO said the monthly data has been affected by the 26.3pc surge in GDP in July.
The 8.5pc annual fall will be of greater concern to the Government. Industrial production in Ireland has been extremely volatile so far this year, with the CSO data revealing that manufacturing fell by its sharpest rate in over a decade back in March.
That contraction was linked to uncertainty in the run-up to the Brexit vote. The latest figures reflect an environment of continued uncertainty on behalf of manufacturers, and that situation is unlikely to change in the near future, not least because of the approach being adopted by British Prime Minister Theresa May over Brexit negotiations.
Philip O'Sullivan, economist with specialist bank Investec, said external developments have a significant effect on Ireland as it's a small and open economy.
"Any ripples of uncertainty with any of our main partners can have a major impact on sentiment here," Mr O'Sullivan said.
"Uncertainty is the enemy of investment, and there is plenty of uncertainty at the moment.
"I think it has been a surprise that Theresa May has decided to push the Brexit button so early. It ratchets up the uncertainty a few notches, which is obviously not helpful for Ireland."
It comes as growth in the Irish services sector slowed last month, with activity, new business and employment all rising at weaker rates, with the Brexit vote partly to blame.
Business sentiment also dipped sharply and was the lowest in three years, according to the latest Purchasing Managers' Index for the sector.
In the UK, the services sector slowed fractionally from August but fared better than economists had been predicting, adding to a list of positive economic data suggesting Britain would now likely avoid a recession this year.