Category Archives: Irish external trade

10/9/15: 2Q 2015 National Accounts: External Trade

In the first post of the series covering 2Q national Accounts data, I dealt with sectoral composition of growth, using GDP at Factor Cost figures.

The second post considered the headline GDP and GNP growth data.

The third post in the series looked at the Expenditure side of the National Accounts, and Domestic Demand that normally more closely reflects true underlying economic performance,

Now, consider extern trade.

  • Exports of Goods and Services were up 13.56% y/y in 2Q 2015 previously having risen 14.17% y/y in 1Q 2015. Over the last 4 quarters, growth in exports of goods and services averaged 14.2% y/y.
  • Most of growth in exports of Goods and Services is accounted for by growth in Goods exports alone. These rose 16.36% y/y in 2Q 2015 after rising 16.86% y/y in 1Q 2015. Average y/y growth rate in the last 4 quarters was 18.38%. In other words, apparently Irish exports of goods are doubling in size every 4 years. Which, of course, is simply unbelievable. Instead, what we have here is a combination of tax optimisation by the MNCs and effects of currency valuations on the same.
  • Exports of Services also grew strongly in 2Q 2015, rising 10.34% y/y, having previously grown 10.94% in 1Q 2015 and averaging growth of 9.94% over the last 4 quarters. Again, these numbers are beyond any reasonable believable uptick in real activity and reflect MNCs activities and forex valuations.
  • Imports of Goods and Services rose 16.9% y/y in 2Q 2015, an increase on already fast rate of growth of 15.46% in 1Q 2015. Unlike exports side, imports side of goods and services trade was primarily driven by imports of services which rose 21.8% y/y in 2Q 2015 (+20.7% y/y on average over the last 4 quarters) as compared to 9.0% growth y/y in imports of goods (+13.5% y/y on average over last 4 quarters).

As the result of the above changes,

  • Trade Balance in Goods and Services fell in 2Q 2015 by 1.8% y/y, having previously recorded an increase of 7.4% y/y in 1Q 2015. Combined 1H 2015 trade balance is now up only EUR399 million on same period 2014 (+2.26%).
  • Trade Balance in Goods registered 26.9% higher surplus in 2Q 2015, and was up EUR6.206 billion in 1H 2015 compared to 1H 2014 (+28.4%). Trade Balance in Services, however, posted worsening deficit of EUR5.584 billion in 2Q 2015 against a deficit of EUR2.174 billion back in 2Q 2014. Over the 1H 2015, trade deficit in services worsened by EUR5.806 billion compared to 1H 2014 (a deterioration of 136% y/y).


  1. Irish external trade continued to show strong influences from currency valuations and MNCs activities ramp up, making the overall external trade growth figures look pretty much meaningless. 
  2. Overall Trade Balance, however, deteriorated in 2Q 2015, which means that external trade made a negate contribution to GDP growth. 
  3. Over the course of 1H 2015, the increase in overall Irish trade balance was relatively modest at 2.26% with growth in goods exports net of goods imports largely offset by growth in services imports net of services exports.

Stay tuned for more analysis of the National Accounts.

16/6/15: Irish Exports & Trade Balance: April 2015

This year, we had some pretty darn bizarre stats coming out of the Irish data on exports of goods. April was no exception.

Take a look at the numbers:

  • On a seasonally unadjusted basis, Irish imports of goods stood at EUR4,699.2 million in April 2015, up 9.35% y/y having previously posted a rise of 15.88% y/y in March. Over the last 3 months through April 2015, imports are up 12.57% y/y. Which sounds like a lot. But...
  • Irish exports of goods have risen to EUR9,813 million in April 2015, up 30.08% y/y having previously posted an increase of 20.10% y/y in March. Over 3 months through April 2015, exports of goods were up cumulatively 22.4% y/y. April 2015 saw the highest monthly volume of exports of goods from Ireland on record.
  • Irish trade surplus for goods trade only shot up 62.33% y/y in April to EUR4,484.1 million - the third highest monthly surplus on record. In March, trade surplus was up 27.60% y/y and over the 3mo through April 2015, trade surplus rose 38.2% y/y.
Charts to illustrate:

These numbers are simply not reflective of real economic activity in Ireland and are so heavily polluted by tax optimisation schemes and correlated exchange rates effects, there is little point of talking any more about our 'exporting' economy.

The CSO breaks down (or attempts to explain) some of the farce as follows: "The main driver behind the April 2015 increase was the increase in the exports of Medical and pharmaceutical products of €1,056 million (+63%) to €2,727 million. The exports of Organic chemicals also increased by €560 million (+40%) in April." On an unadjusted basis: "During April 2015 imports of Chemicals and related products increased by €234 million (+25%) to €1,179 million and imports of Miscellaneous manufactured articles increased by €137 million (+28%) to €628 million. Imports of Machinery specialised for particular industries also increased in April by 86% to €225 million." 

You have to laugh here: having created no new serious additional production capacity of any note over the last 12 months, we have rises in output to the tune of 25%-plus. If this wasn't a miracle economy of MNCs, we would be world-beating, record-holding economy for productivity growth, richer than Switzerland and Norway, combined. But do keep in mind, employment in pharma sector has been effectively stagnant for years, just as output of the sector is booming at exponential rates.

17/5/15: Irish Merchandise Trade: 1Q 2015

Irish trade in goods statistics - the ones responsible for the tax-induced economic dizziness in the National Accounts over 2014 - are back at posting more absurd numbers.

Take a look at data through March 2015:

  • 1Q 2015 imports of goods stood at EUR14,819 million which represents an increase of 10.5% y/y and 18.6% cumulative rise over the last two years. Relative to 2000-2007 period average, Irish imports of goods are up 3.8%. These are pretty large numbers, even allowing for currency valuations. 
  • 1Q 2015 exports of goods from Ireland stood at EUR24,957.6 million, which represents an increase of 17.4% y/y. Yep, apparently Irish exports outputs are growing at a rate that implies doubling of the entire export capacity every 4 years, plus a month or so. No, seriously, folks - at this rate of building manufacturing facilities and logistics parks to accommodate all this stupendous growth, there won't be any cranes and construction crews left in the entire UK and probably none in France either. All would have been busy adding new land to Ireland.
  • Now, we can compute % change in exports per 1% change in imports as the latter are often inputs into production of the former. Even recognising that imports of goods are also growing on foot of improving domestic demand, current exports elasticity with respect to imports is the third largest - lagging behind only two out the last 25 years: 1992 and 2004. What happened back in 1992? Ah, yes, new FDI in ICT manufacturing sector pushed Irish exports by 16% y/y in one year off a low base. It took couple of years thereafter for imports to catch up with this tremendous 'value creation' by stuffing computers and software disks into boxes. And in 2004? Well, that arrived on foot of abysmal 2003, when exports sunk and trade surplus went into largest y/y decline on record. So here we have it: the miracle of Irish exports growth: more of 1992 (tax arbitrage) and less 2004 (post collapse bounce).

Now, take a look at some dizzying numbers for March:

As the above shows, March marked the third highest value of goods exports for any month on record. Year on year, imports of goods were up 14.21% in March after posting 12.08% growth in February. Meanwhile, exports of goods rose 20.85% y/y in March after posting 16.92% growth in February. Trade balance rose 32.61% y/y in March having grown 24.21% in February.

Put frankly, even Google's big data analysts would struggle connecting these numbers to any tangible reality.

Chart below shows shorter range for dynamics.

17/4/15: Pies in the skies & Irish exports: Jan-Feb 2015

Some interesting numbers on trade in goods for Ireland. As you know, I usually update these series on a quarterly basis - in part due to data volatility, in part due to lack of time. But there is something interesting afoot in the data, so here it is for the first two months of 2015 - subject to future verification of any trend.

Total imports of goods stood at EUR4.563 billion in February 2015, up 11.9% year-on-year, having risen 5.1% y/y in January. This means imports over the first two months of 2015 are up 8.3% y/y. February annual rate of growth in imports was the highest in 9 months.

Meanwhile, exports of goods and services shot to EUR7.937 billion in February, up 16.9% y/y, having posted an increase of 14.2% in January. Again, over the first two months of 2015, exports rose 15.5% y/y.

Trade balance at the end of February stood at EUR3.374 billion, up 24.3% y/y, after posting a 31.4% rise in January. Over January-February 2015, cumulated trade balance is up a whooping 27.7% y/y, and for the December-February 3 months period it is up 31.7% y/y.

These are bizarre and, frankly, unbelievable numbers. Last time we have seen this level of volatility in trade balance to the upside was in August 2012 (for one month only and then, nothing comparable to 41.1% y/y increase registered in December, 31.4% rise in January and 24.3% rise in February).

So something is brewing in the external trade stats. Last year, we had a runaway performance in the National Accounts-registered external trade numbers without having a corresponding rise in the customs reported figures, which was down to 'contract manufacturing' scheme (or whatever you want to call this accounting trick). This time around, either the said scheme is now also polluting our customs trade data or something new is afoot.

The 'new' bit appears to be the 'old' bit - look at the sources of growth in our trade:

and in our trade balance:

In simple terms, ex-Chemicals (pharma), our exports since the start of 2009. Pharma / Chemicals exports are up. Our trade balance in goods, ex-Chemicals is negative. That is right - negative (some 'exporting nation' we are) and pharma trade surplus is vast and on the rise again.

Let's take a slightly more detailed decomposition of movements in trade volumes, cumulated over the last 3 months (December 2014 - February 2015). What do we have?

  • Imports of all goods ex-chemical sectors rose 6 percent year on year, or EUR561mln. Exports of same rose 8 percent or EUR683.6 million. So trade deficit here shrunk by EUR122 million y/y - a good result, but accounting for only 5 percent of the entire gain in trade surplus over the same period across the economy.
  • Imports of chemicals and related products (pharma in broad sense) were up EUR423.4mln or 16% y/y, but exports of same rose EUR2.592 billion or 22% y/y. Trade balance here rose by EUR2.169 billion.
  • So 95% of the trade balance gains in December- February 2015 was down to the category known as Chemicals and related products, n.e.s. (5) and only 5% of the gains were down to the rest of the entire goods-related economy.

And guess what: the 'old' news is truly 'old': the ratio of exports to imports in the economy excluding chemicals sector is falling - steadily, since at least 1995. Meanwhile, the ratio of exports to imports in the chemicals sector, having fallen on foot of patent cliff in 2009-2013 is now rising once again since Q1 2014. Purely as a coincidence, Q1 2014 is when the bogus exports from the 'contract manufacturing' schemes started showing up in the official national accounts data.

Incidentally, the above also explains the miracle of Irish productivity - the massive 'improvements' of which in recent years is nothing more than a pharma (and few other MNCs-dominated sectors, some not included in the goods data and polluting our services data instead) rebalancing into new tax optimisation schemes, post-patent ones.

Welcome to the land where sand castles are sold to visitors as 'de real ting' and pies in the skies are served for desert...