Dáil Éireann Debate, Tuesday - 15 June 2021
414. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department continues to monitor activities in the manufacturing and services sectors and thereby identifying potential strength and weakness and any remedial action as required; and if he will make a statement on the matter. [32096/21]
Amharc ar fhreagraThe reintroduction of Covid-19 related restrictions at the end of last year had a significant impact on the domestic economy in the first quarter. While much of the manufacturing sector remained open throughout the quarter, many domestic services activities were largely closed. As a result, the impact of these restrictions across sectors has been uneven. Gross Value Added (GVA) in manufacturing grew by around 13 per cent on a quarterly basis in the first quarter of 2021. In contrast, GVA in contact-intensive service sectors (which includes Distribution, Transport, Hotels and Restaurants and Arts, Entertainment and Other Services) declined by 9 per cent on a quarterly basis, with activity around 27 per cent below the pre-pandemic (Quarter 4-2019) level.
The manufacturing sector has continued to perform strongly in recent months. Overall industrial Production in April remained above pre-pandemic levels. Crucially, production in the mainly indigenous “traditional sector”, which has a higher domestic value-added and is more labour-intensive than the modern sector of the economy, was also above its pre-pandemic level. Furthermore, the manufacturing PMI rose to the highest level on record in May as demand picked up following the re-opening of the economy, pointing to a further increase in manufacturing over the coming months.
However, the Covid-19 pandemic continues to weigh on services activity. The CSO’s Monthly Services Index fell by 0.5 per cent on a monthly basis in April, with overall activity around 3½ per cent below the pre-pandemic (January 2020) level. Indeed, with the exception of ICT, the level of activity remained below the January 2020 level in all sectors in April.
However, the vaccination programme is now having a positive effect and the number of Covid-19 case numbers have fallen by more than 90 per cent from the peak in January and the incidence among all age groups has declined. As a result, the Government began easing restrictions in early April. This relaxation has recently gained pace allowing the economy to start to recover in the second quarter. In line with this, soft data point to a recovery of services activity with the services PMI reaching its highest level in over five years in May as pent-up demand was released following the initial easing of restrictions. A range of other indicators also confirm that an economic recovery is underway, including business and consumer confidence indicators, daily card payment data, as well as May’s tax receipts. Furthermore, the National Economic Recovery Plan published on 1st June sets out how the Government will support the full resumption of economic activity, get people back to work and support those sectors which have been disproportionately affected by the pandemic.
