December output slump signals recession is back
CSO says economy shrank in third quarter of 2011 as unemployment remains persistently high
NEW evidence that the economy is back in recession came yesterday as figures showed the manufacturing sector shrank again in December as new orders slumped.
A gauge of factory output by NCB Stockbrokers was 48.6 last month, compared to 48.5 in November, NCB said. Any figure below 50 signals a contraction.
This suggests that manufacturing contracted in both November and December after expanding by the smallest of margins back in October.
The Central Statistics Office (CSO) said last month that the economy shrank in the third quarter after expanding in the first half of 2011. Gross domestic product (GDP) fell by 1.9pc in the third quarter and the country will have officially returned to recession if figures show the economy shrank again in the final quarter.
The Department of Finance will publish exchequer returns this afternoon, giving the first clear picture of the Government's spending in 2011.
The figures for the 11 months to the end of November were behind schedule. Inspectors from the IMF and the European Commission are due to return to Dublin next week for routine checks on the Government's implementation of the bailout plan which demands austerity in return for loans.
Brian Devine, an economist at NCB Stockbrokers which published yesterday's manufacturing report, said he believes that the economy has not really grown in years.
Citing persistently high unemployment, he said 2011 was the fifth year of economic contraction. Last month's decline is "definitely related to the eurozone crisis", Mr Devine said.
"People are just not willing to commit to investment with so much uncertainty around. Figures on the services industry due to be published tomorrow are also poor," he added.
There was a rare glimmer of hope as new export orders rose marginally over the month, ending a three-month period of decline. This was linked to higher new orders from the UK, the report said.
A second glimmer of hope was that employers did not cut their workforces for the first time since August.
Manufacturers here cut production for the second month running amid weak demand, although the reduction was small.
Spare capacity was evident in the sector as firms depleted outstanding business at the fastest rate in three months. Input costs at Irish manufacturers increased as the euro weakened against sterling.
Intense competition led to a drop in output prices, in spite of further cost inflation. Prices charged have decreased in each of the past five months. The figures also showed that suppliers' delivery times lengthened for the third successive month amid stock shortages at vendors.
Although the rate of lead-time lengthening remained modest, it was the fastest in this sequence.