Plunge in trade surplus by 27pc blamed on end of drug patents
THE nation's trade surplus for goods fell 27pc to €2.9bn in September as plunging pharmaceutical sales knocked a hole in exports.
September's trade surplus fell to the lowest level since April 2011 as exports dropped 6pc on the same month last year, the Central Statistics Office said yesterday.
Irish export growth now looks likely to be weaker this year than last year.
The sharp declines could have a knock-on effect on economic output and reduce the size of gross domestic product if the problems seen recently persist.
That could force the Government to introduce tougher budgets to meet deficit targets.
Alan McQuaid of Merrion Stockbrokers said it "remains to be seen" whether the weak September performance was a one-off problem.
"If it's not then it's a serious cause for concern, significantly denting export growth and impacting negatively on GDP."
The CSO said seasonally adjusted exports fell 19.5pc month-on-month as sales of chemicals fell.
There was a 33pc fall in the value of exports of organic chemicals and a 10pc decline in medical and pharmaceutical products. Imports rose 5.3pc month-on-month.
Exports slid to €7.3bn in September from €7.8bn a year earlier, as sales of medical and pharmaceutical products and organic chemicals dropped.
Imports rose to €4.4bn from €3.8bn due to an increase in imports of airplanes, which are bought and sold by the flourishing aircraft leasing industry.
Together, these two sectors accounted for 51pc of total goods exports in August, down to 46pc in September, Davy Stockbrokers said in a report.
Economists had been expecting a dramatic fall in exports and the trade surplus after industrial production figures published earlier this month revealed a sharp decline in pharmaceutical production.
The CSO does not give detailed reasons for the declines but most economists now believe that the so-called 'patent cliff' which sees the end of patents involving some blockbuster drugs produced in Ireland is behind the fall.
While recent figures show a worrying decline in exports, the overall trade surplus for the first nine months of the year was a healthy €33.2bn, which was €699m more than the aggregate surplus of €32,491m in the same period in 2011.
"There are clear downside risks in the short term, especially in relation to external demand," said Merrion Stockbrokers' McQuaid.
"Another concern relates to the sustainability of the positive contribution from the chemicals sector. Output from this area tends to be quite erratic at the best of times due to company-specific developments in patents and product cycles."