The Central Statistics Office (CSO) has warned that “contract manufacturing” and outsourcing of industrial activity was leading significant volatility in the State’s manufacturing output numbers.
Contract manufacturing occurs when a company outsources production to a third-party typically based abroad.
The CSO’s latest figures show production in manufacturing industries rose by 5.3 per cent in May. This followed a significant increase in April and a similarly sharp decline in March.
The big increase in April is said to have been driven by Apple increasing the production of iPhones via a third-party company in China.
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The profit generated from the sale of these phones is expected to be channelled directly through Apple’s Irish operation, resulting in a bigger tax liability for the company here.
The Department of Finance is projecting corporate tax receipts to hit €24 billion in 2023 but several analysts believe this will be eclipsed by about €2 billion.
The additional receipts are linked to an uplift in corporate profits generally, the exhaustion of certain capital allowances and a significant jump in contract manufacturing by several Irish-based firms, including Apple’s main Irish subsidiary, Apple Operations International.
The CSO’s figures show the “modern” sector here, which includes the chemical, pharmaceutical, and computer and electronic sectors, recorded a fall of 18.7 per cent in industrial production in the period March to May 2023, compared with the previous three-month period.
“It should be noted that these exceptionally volatile results are not common to all sectors in the industrial economy,” the CSO said.
The “traditional” sector, which is made up of all remaining enterprises, recorded a moderate increase of 3.8 per cent in the period March to May 2023.
Eurozone bond yields edged back towards highs reached last week after US data added to concern that interest rates will need to stay elevated for longer, and the focus turned to Wednesday’s US consumer prices data.
Germany’s 10-year government bond yield, the euro area’s benchmark, was up 1.5 basis points (bps) at 2.649 per cent. It rose 24 bps last week, touching its highest level since the beginning of the banking turmoil on March 9th at 2.677 per cent.
Germany’s two-year yield, most sensitive to changes in interest rate policy, rose 2.5 bps to 3.333 per cent after hitting its highest level since October 2008 last week at 3.393 per cent.
A resilient economy and commentary from policymakers pushed yields higher over the last week, Jens Peter Sørensen, chief analyst at Danske Bank, said. – Additional reporting by Reuters
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