Export volumes picked up in the second half of last year, but preliminary indications point to a weaker performance in January, according to the latest trade figures from the Central Statistics Office (CSO), writes Cliff Taylor, Economics Editor

The figures also show that the US has overtaken the UK as the main destination for exports.

The export data show a pick-up in the second half of last year, as industry benefited from the international upturn. Volume figures, which net out the price effect, show a rise of more than 7 per cent in export volumes in the second six months of the year compared to the first half. Compared to the second half of 2002, exports volumes were up a more modest 3.6 per cent.

The value of exports last year was heavily affected by currency movements, which reduced the euro value of goods sold in US dollars and, to a lesser extent, in sterling. Comparing the figures with 2002 is also distorted by the ending of a VAT fraud that heavily influenced trade in electrical machinery and parts with the UK in late 2002 and early 2003.

This means that the 12 per cent fall in exports last year to €82.176 billion overstates the extent of the decline. The 14 per cent drop in imports to €42.525 billion similarly overstates the decline. However, the CSO says that the balance of trade was not heavily affected. Last year the trade surplus of exports over imports fell by 9 per cent to €34.6 billion.

With the end of the VAT fraud contributing to a 35 per cent fall to €13.46 billion in exports to Britain, the US is now the largest export destination. Sales in the US rose to €16.9 billion from €16.4 billion the previous year. The fall in the dollar means that this figure understates the underlying volume rise in exports to the US to some extent.

However, as many multinationals in the State responsible for US sales denominate their accounts in dollars, they are somewhat insulated from the ups and downs of the US currency.

The other notable change last year was a 24 per cent drop in exports to Belgium, which totalled €10.3 billion. This relates to a fall in chemical exports priced in US dollars, according to a note from Davy Stockbrokers, which pointed out that sales to other euro-zone states rose by 6 per cent. Exports of organic chemicals, previously a high-growth sector, dropped 12 per cent to €15.4 billion.

The overall picture is of a pick-up in exports in the second half of 2003, with the euro value affected by currency trends. However, the January figures are poor, with a 5 per cent monthly drop in seasonally adjusted exports to €6.6 billion, with imports down 8.7 per cent to €3.79 billion.

This was the second successive month in which seasonally adjusted exports declined. January was 2.5 per cent down on the same month last year.

Monthly figures are volatile and can be affected by production patterns at some of the major multinationals. However, with other disappointing international indicators evident in recent weeks, analysts will be closely watching data over the coming months to see whether the expected revival in exports gathers pace.