Wednesday 22 November 2017

First GDP, now our industrial figures are skewed

Economist Conall MacCoille
Economist Conall MacCoille
Colm Kelpie

Colm Kelpie

Official data on industrial production has become the latest economic gauge to fall victim to Ireland's complex open economy.

The Central Statistics Office (CSO) has had to revise up its industrial production growth figure for 2015 to a massive 38pc on the back of the surge in GDP, and has cautioned that the data "may no longer provide a sufficient understanding of domestic production".

The CSO last month announced a surprise revision to Ireland's GDP growth figure for 2015, from 7.8pc to 26.3pc.

Experts dismissed the figure as meaningless, as it reflected the accounting activities of some of the multinational companies based here, and not the underlying economy.

The CSO announced yesterday that the Industrial Production and Turnover (IPT) results have been revised to reflect the GDP revision, with an annual increase of 38.5pc. That compares with 24.2pc in 2014.

"The large increase is attributable to the globalisation activities of a small number of companies," the CSO said.

"Users should exercise caution when interpreting the data, as IPT indicators may no longer provide a sufficient understanding of domestic production. CSO is exploring the development of new short-term indicators."

The CSO also prominently placed the warning on its release for the IPT figures for June, which showed an increase of 7.2pc compared with the previous month, and down 0.7pc on the year. But despite the CSO's caution, Davy Stockbrokers said the data shows that, for now, the growth of industrial output in 2016 is not being distorted in a similar fashion as for 2015.

It pointed out that industrial production growth in the first half of this year grew by 1.5pc, compared to a massive 35pc in 2015.

"Nonetheless, traditional sector output has contracted by 0.4pc in the first half of 2016, following a 4.4pc gain last year, said Conall Mac Coille, Davy economist.

Davy also said that underlying growth in the economy last year was 6pc, and close to 5pc in the first half of this year. But it expects to downgrade its 4pc forecast for next year over the Brexit vote.

Irish Independent

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