The latest Irish manufacturing production data for November surprised strongly on the upside, posting a staggering 55.7% mom increase from October, a record increase even by Irish standards. For confidentiality reasons, the Irish statistics office does not give any information on the sector that drove that increase, but we suspect it is due to activities in the ICT sector or possibly pharmaceuticals and may well involve contract manufacturing. The significance of these data is that even allowing for a significant pull-back in December data, Irish GDP is likely to be strongly positive in Q4 rather than modestly negative as we previously envisaged. As a result, there are upside risks to our current GDP forecasts for both 2020 and 2021.
Additionally, goods trade data for October posted a cumulative increase in goods exports of 4.3% yoy compared to the same period in 2019. Importantly, the chemicals sector, which accounts for two-thirds of goods exports in the year to October, has grown by 11.9% yoy over this time period. Movements in the pharmaceutical sector as well as other multinationals may provide some upside risk for Irish GDP over the next year or so as vaccine production ramps up.
Irish consumers have also proven to be more resilient despite elevated unemployment. Daily debit and credit card transaction data from the Central Bank of Ireland showed that spending was about 60% above the pre-pandemic baseline in the lead up to Christmas. While there may be some seasonality effect in these data, we think that Irish consumers have been supported both by government support in response to Covid-19 as well as the requisite digital infrastructure needed to continue shopping in a locked down environment.
While the spending data remain relatively positive, the latest unemployment data remain more downbeat, particularly with the re-introduction of level 5 restrictions. The official unemployment rate understates the current weakness in the job market and currently sits at 7.2% in December, which is slightly down from November’s figure of 7.3%. Perhaps more importantly, the Covid-adjusted unemployment rate that includes those receiving the Government’s Pandemic Unemployment Payment remains elevated at 20.4% in December from 21% in November. However, it is important to note that this figure reflects temporary layoffs rather than permanent job losses, and as such, may improve rapidly once vaccine roll-out becomes better established in Ireland.