Cantillon: Brexit makes forecasting extremely hard

Taking the temperature of the exports side is tricky at the best of times. Goods and services exports are counted separately, and there can be significant variations between changes in the value and volume of exports, driven largely by movements in currencies.

As we saw in the recent GDP figures, this can get even more complicated when major corporate restructurings take place.

For some reason, possibly due to a couple of big tax inversion deals leading to large corporations being headquartered here, contract manufacturing – goods produced overseas on behalf of Irish firms – jumped last year.

Davy pointed out that the average monthly total of goods exports shown in the trade figures last year was €112 billion. These monthly figures exclude contract manufacturing. However the annual CSO national accounts – in which exports include contract manufacturing – showed monthly goods exports of €196 billion.

Both figures rose strongly, but the contract manufacturing boost gave a turbo change to the national accounts figure – and to GDP as a whole.

Taking data from Dublin Port as a marker for trade volumes, Davy estimates that underlying volume growth in goods exports was strong both in 2015 and so far this year, even if currency movements have hit the value of these exports so far this year.

Meanwhile service exports – driven by multinational tech firms but also indigenous players – rose by 15 per cent plus last year.

There could also be a post-Brexit hit in sales to UK markets, if consumer demand there slackens. The value of goods exports fell in May both compared to the previous month and the same month last year, according to Friday’s monthly trade figures.

As Davy says, the actual volume of exports will have performed better, though recent manufacturing purchasing managers’ index data do suggest a need for some caution.

A number of analysts have warned that 2016 could be a bit of a year of two halves, with strong growth in the first half followed by a slowing of expansion in the second. The two key variables look to be consumer confidence and the exporters. Neither of these is ever easy to predict, but post-Brexit the job of the economic forecaster is well nigh impossible.