Thursday 22 August 2019

Eurozone woes and Brexit fears hit Irish exports hard in June

British Prime Minister Boris Johnson. Photo: Reuters
British Prime Minister Boris Johnson. Photo: Reuters

David Chance

Exports fell by 14pc in June from a year earlier as the growing economic woes in the eurozone took their toll here and uncertainty over Brexit hit UK sales.

Despite the poor June export figures, the overall performance in the first half of the year was still better than expected.

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Exports to the EU plunged €552m, or 9pc, in the month from a year earlier, a period that saw the German economy contract, along with the UK, where exports from here fell by 6pc to €1.29m in June.

Seasonally adjusted goods exports decreased by €1.92bn to €11.53bn in June from May, and there was a big hit from aircraft in the transport sector, which saw a drop of 82pc in exports from a year earlier.

US exports rose strongly in June, however, to €3.49bn from €3.3bn.

On a six-month basis, the export-led economy here was still performing ahead of expectations.

The value of goods exports for the period January to June 2019 was €76,547m, an increase of €7,123m, or 10pc, from a year earlier.

Compared with the performance of other heavily export-oriented economies, Ireland appears to be holding up relatively well.

Its exposure to the US economy, still by far the fastest growing in the developed world, is a boon, while the low level of exposure to China has helped the State's exporters avoid some of the pitfalls that have befallen Germany.

The German Federal Statistics Office said earlier this month that exports from the eurozone's biggest economy fell by their largest amount in three years in June, with an 8pc drop from a year earlier. Brexit, however, could deliver a big shock to exports next year. The UK economy has already been whipsawed by stock-building and plant closures ahead of the original March 31 date for leaving the EU, and the new October 31 exit date is looming fast.

The Central Bank of Ireland has looked at the impact so far on Irish exports to the UK, and says that it is hard to discern a significant pattern, although it does note that there appears to have been an impact on machinery and transport equipment, where €2.2bn of the goods exported went to Britain.

From 2011 to 2015, the value of Irish exports of machinery and equipment to the UK grew at an annual average rate of just over 13pc, while the equivalent figure from 2016, the year in which the Brexit referendum was called, through to 2018 showed a decline of 6.5pc in shipments from this sector of industry.

On the other hand, agrifoods exports to the UK have held up well, rising by 9.2pc in 2017 and by 3.1pc in 2018, after a sharp fall in 2016. With UK prime minister Boris Johnson, inset, saying he is willing to embrace a no-deal Brexit unless the EU rewrites the withdrawal agreement, risks remain.

Overall, machinery and transport sales were a big positive for exports in the full six-month period, rising to €17.99bn from €16.42bn in the first half of 2018, although chemicals, the second most important export line, that covers the State's large pharmaceuticals industry, saw a drop in the year to end-June to €8.18bn, from €10.2bn.

Even with a lower contribution from exports this year, economic growth here of 4.9pc will far outpace the eurozone average.

Irish Independent

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