Output from multinational-dominated ‘modern sector’ of economy drops 21%

The highly globalised “modern sector” of the Irish economy which includes the State’s big pharma and IT industries recorded a 21 per cent drop in output in the three months from December to February, when compared with the same period last year.

Central Statistics Office (CSO) figures show production in manufacturing industries as a whole was 13.7 per cent lower in the three-month period (on an annualised basis) with an uptick in output from the traditional sector partially offsetting the downturn in the modern sector.

The latest figures coincided with a sharp 25 per cent drop-off in corporation tax receipts. Exchequer returns for March, published by the Department of Finance last week, showed corporate tax, now the Government’s second-largest revenue source, generated €2.4 billion during the first three months of 2024.

This was €805 million (25 per cent) down on the same period last year. Minister for Finance Michael McGrath said the decrease related “to timing issues and is likely to be made up later in the year”.

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The Irish economy’s industrial production figures are volatile because of a large level of contract manufacturing undertaken by companies here.

Contract manufacturing occurs when a company outsources production to a third-party, which is generally based abroad. Apple typically increases production of iPhones via a third-party company in China.

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“The scale of contract manufacturing and outsourcing in the Irish industrial economy has increased since 2015, meaning that very high levels of short-term, ie monthly, volatility may be present in the indices presented in this release,” the CSO said.

The agency’s latest numbers show production in manufacturing industries increased by 24.3 per cent when compared with the previous three-month period, while on a monthly basis, it rose by 2.2 per cent in February.

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