Per head, exports of manufactured goods are among the highest in the world, writes DAN O'BRIEN

FIGURES RELEASED yesterday by the Central Statistics Office show that industrial companies in Ireland – from power generators to pin-makers to whiskey distillers – invested €553 million in all kinds of capital goods in the first quarter of the year.

Ireland has an unusually large manufacturing sector. Per head, exports of manufactured goods are among the highest in the world. Although services account for most of the growth opportunities in high-wage economies, retaining a manufacturing base is important, if only to ensure eggs are not all in one basket.

For any country to maintain its manufacturing base, industry must constantly replace worn-out plant and equipment. If production is to be ramped up, its companies must add to the total capital stock.

As the first chart shows, investment in the first quarter was higher than the recent low-point, reached a year earlier, but low when compared to the average over the period since the figures were first collected at the beginning of 2008.

The CSO’s statisticians have not been bearers of much good news lately.

Alas, it is hard to interpret recent trends in industry’s capital purchases as reason for celebration. The trend observed in the first chart is in contrast to how much industry is churning out. Last year, industrial production reached an all-time peak, just pipping the previous best performance, recorded in pre-crisis 2007.

High levels of production with low levels of investment in capacity cannot go on for ever.

The CSO figures give a detailed breakdown by sector. As the second chart shows, the chemicals and pharmaceuticals sector was the second-biggest buyer of capital goods. While it is by a very considerable distance the larger producer of industrial output, its lower investment since 2008 accounts for much of the overall downward drift.