IRISH manufacturers exporting to the US are feeling the pain from the continued strength of the euro against the dollar, according to new figures from the Irish Exporters' Association (IEA).
Total merchandise exports in 2006 were 88.546bn, up just 0.4% on 2005, according to the IEA's end-of-year statement which is due to be released in the first week of 2007.
IEA chief executive John Whelan attributed the static export figures to dollar weakness. "We're looking at, unfortunately, exports to the US having seen a significant downturn in the second half of the year. A sizeable part of that is down to the unfavourable trading position we find ourselves in, " he said.
The concern over merchandise exports was, however, ameliorated somewhat by encouraging figures for service exports. Service exports were up 15% to 53.326bn last year as financial institutions, call centres and other traderelated services showed strong growth.
Whelan said the big question facing Irish exporters was whether the service sector could take up the slack while manufacturers battle the challenging trading conditions.
"The biggest concern that we would have is that the dollar would continue to weaken, " he said.
The euro is currently trading at just under $1.32 and has consistently traded above the $1.30 level in recent months, hitting an 18-month high of $1.33 earlier this month. Concern about the US trade gap and debt figures have consistently weighed on the dollar over the past two years.
Weakness in the domestic economy and a series of rate cuts by the US Federal Reserve, meanwhile, have driven investors away from US assets and pushed the currency still lower. The dollar has declined by almost 10% against the resurgent euro over the past year.
Though it remains below the record high of $1.36, reached in December 2004, the present exchange rate is still hurting Irish exporters, according to the IEA. "The strength of the euro has made it very difficult for exporters to maintain market share in the US, " Whelan said, with engineering and manufacturing companies in particular "having a real, real tough time".
Exporters may take some solace from US economic data released last weak, showing better-than expected levels of consumer confidence, house sales and manufacturing growth. Indeed the Bank of New York is predicting that the dollar will close on the euro in the opening month of 2006. "The market is well positioned for some initial dollar buying, " according to Michael Woolfolk, senior currency strategist at the bank.
"The data pointed to a solid fundamental backdrop. It won't push the US Federal Reserve to cut rates any time soon. Global fund managers will buy US equities and bonds at the beginning of the year."
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