16/8/2013: H1 2013 Trade in Goods & Balance Dynamics for Ireland

On foot of my post detailing Irish cumulated figures for trade in goods for H1 2013, some asked me to post on the relationship between exports and trade balance. Here are few charts, taking snapshot from H12000 through H1 2013:

First, two charts showing levels of exports and trade balance for trade in goods:

Note that in the first chart, there is barely any difference between the 2000-2013 average level of exports (at EUR44.145bn) and 2009-2013 period average (at EUR45.077bn). The gap is only 2.1% of EUR932mln. At the same time, the second chart shows that there is a massive gap between the average trade balance over the period of 2000-2013 (EUR17.184bn) and for the period of 2009-2013 (EUR20.728bn) -  a gap of 20.6% or EUR3,544 mln. The core reason for this is that much of the 2009-2013 'stellar' performance in our trade surplus was driven by collapse in imports, rather than a rise in exports. 

To see this, let us plot exports against trade balance:

The last chart clearly shows that in 2009-2013, on average, exports were tracking changes in trade balance, but they were not doing so 1:1.

More interestingly, the chart shows that trade in goods in Ireland is in trouble. In 2009-2013 period, Irish Government policy has been to rely solely on exports (of goods and services) in driving the economy toward recovery and debt sustainability. This hope rests on growth in exports and simultaneously positive trade balance and growing trade balance as the key parameters for consideration when it comes to both economic growth and debt sustainability.

Alas, in years 2010, 2012 and 2013 (in other words in 3 out of 5 years), measured by H1 figures alone, Irish goods traded operated in the 'pain spot' region - the region of shrinking exports and shrinking trade surpluses.

In other words, in terms of levels our merchandise trade is performing well. But in terms of growth it is performing poorly. And this is despite a huge drop-off in imports, something that is not likely to last when the economy goes back to capital investment (imports of capital goods will rise) and/or consumption recovery (imports of consumption goods will rise).

15/8/2013: H1 2013 Trade in Goods data for Ireland

Latest data for Merchandise trade for June 2013 allows us to make some comparatives for the first half of the year. Here are some stats, all covering only merchandise trade:

• Total Imports rose in H1 2013 by 3.12% on H2 2012 and were down 2.39% on H1 2012. Imports were up 3.11% in H1 2013 compared to the 6 months cumulative averages over the three years from H1 2010 through H2 2012. H1 2013 levels of imports were 23.2 below their peak for any 6 months period since H1 2000.
• Total Exports fell in H1 2013 by 4.35% on H2 2012 and were down 6.55% on H1 2012. Exports declined, in absolute terms by EUR3.045 billion year-on-year. This marked the largest 6-mo cumulative drop in exports since H1 2003, marking the H1 2013 the worst year-on-year 6 months period since then.
• Exports were down 4.48% in H1 2013 compared to the 6 months cumulative averages over the three years from H1 2010 through H2 2012. H1 2013 levels of exports were 12.43% below their peak for any 6 months period since H1 2000.
• Trade Surplus fell 12.62% on H2 2012 and was down 11.47% in H1 2013 compared to H1 2012. In level terms, trade surplus was down EUR2.442 billion in H1 2013 compared to H1 2012, marking the worst 6 months period since H1 2005.

Charts below illustrate the trends:

Good news, per chart above, Trade Surplus is still running above 2000-present average, although Exports are now running below their 2000-present average. Bad news, the above chart does not adjust for inflation.

Not-too-good news is, exports are now in the negative territory in terms of y/y changes. Remember, we need positive growth in total (merchandise and services) exports of ca 5% per annum to maintain any semblance of sustainability. Here's the tricky bit:

As chart above shows, we really need rapid, very rapid growth in services exports to return our total exports and trade balance to where we need them to be to maintain economic activity at the levels that will be consistent with long-term gradual reduction of public debt.  Over the last 5 years, merchandise exports in Ireland grew on average at 0.59% y/y and over the last 10 years this growth was 0.94%. Owing to the recent collapse in our imports, our trade balance grew on average at 11.73% in the last 5 years. However, over the last 10 years the growth in our trade balance was much less dramatic 3.18%.

28/6/2013: Exports-led recovery: Q1 2013

I covered the headline numbers and trends for the GDP and GNP in previous two posts: here and here. Now, onto some more detailed analysis.

Remember, from the very beginning of the crisis, Irish and Troika leaders have been incessantly talking about the 'exports-led recovery'. Position on this blog concerning this thesis consistently remained that:

1. Exports growth is great, but
2. Exports growth is unlikely to be sufficient to lift the entire economy, and
3. Exports growth projections were unrealistic, while
4. Exports re-orientation toward services, away from goods was less conducive to delivering real growth in the economy.

Q1 2013 data continues to confirm my analysis.

In Q1 2013, based on real valuations (expressed in constant market prices),

• Exports of Goods & Services shrunk 6.47% q/q and fell 4.09% y/y. This compares to +1.19% q/q growth in Q4 2012 and +1.28% expansion y/y. Compared to Q1 2011, when the current coalition took over the reigns in the Leinster House, total exports of goods and services are down 0.88% in real, inflation-adjusted terms. Troika sustainability projections envisioned growth of over 6% over the same period of time.
• Imports of Goods and Services showed pretty much the same dynamics as exports in both Q4 2012 and Q1 2013, but owing to sharper contractions in 2011-2012 these are now down 4.34% compared to Q1 2011.
• Exports of Goods fell in Q1 2013 by 3.83% q/q and 9.37% y/y, while there were declines of 2.68% q/q and 2.33% y/y in Q4 2012.
• Exports of Services were down 8.75% q/q but up 1.27% y/y in Q1 2013, and these were up 4.77% q/q and 4.63% y/y in Q4 2012.

• Trade Balance in Goods and Services fell 4.96% q/q and was down 3.63% y/y in Q1 2013, with Q4 2012 respective changes at -15.91% q/q and +0.98% y/y. Compared to Q1 2011, trade balance is up 15.91%
• Trade Balance in Goods was down 6.63% q/q in Q4 2012 and this deteriorated to -10.73% growth in Q1 2013. Y/y, trade balance in goods contracted 0.05% in Q4 2012 and shrunk 10.59% in Q1 2013. On Q1 2011, trade balance in goods is down 14.04%.
• Trade Balance in Services fell from EUR1,130mln in Q3 2012 to EUR132mln in Q4 2012 before improving to EUR601mln in Q1 2013. In Q1 2012 the balance stood at EUR28 million.

5/3/2013: Irish trade with BRICs: 2004-2012

Four charts on Irish bilateral goods trade with Bric countries: