Notes on the Front

When the CSO’s industrial production numbers were produced there was a sense among some commentary that at least this side of the economic equation is producing plus signs. But they might want to pause that until they read the whole report (and not just the headline figures).

First, production figures tend to rise in September, after a slack August. Still, we’re in better shape this year than last as the index is higher.

Second, when you break down the figures between the ‘modern’ (foreign multinational) sector and ‘traditional’ (mostly indigenous) the picture becomes mixed. The moderns increased production by 17 percent over August. The traditionals actually fell back marginally. Given that there are nearly twice as many employed in the traditional sector this should give us a bit of worry.

But here’s the ‘hold your horses’ moment: the CSO produced quarterly results – from 3rd quarter last year to 2nd quarter this year, a period of nine months.

• Modern Sector: Production increased by 11.2 percent. Employment fell by 3,900 (or 5.4 percent)
• Traditional Sector: Production increased by 5.1 percent. Employment fell by 3,700 (or 2.7 percent)

So, production increases and jobs are lost. Of course, we shouldn’t expect this pattern to continue. There is considerable slack in these sectors. Ramping up production may not immediately generate jobs but as production continues to climb, jobs should come on-stream. That’s the theory.

But the main driver is the modern sector, in particular the chemical/pharmaceutical sector. These are capital-intensive. Job creation will be minimal compared to what is needed.

The recession was not caused by a collapse in external demand; our net exports have held up reasonable well. So we shouldn’t fall into the trap of ‘export-led recovery’ thinking. This sector will not lead the recovery. That will come from domestic sectors.

And it is these sectors that are being lined up for a savaging by the Government’s new budgetary strategy.