The headline figures for industrial output show a continued decline but this masks differences at the subsectoral level.
The overall index of industrial production fell by 5.9% compared with the same period of the previous year in March 2011, having risen by 0.6% in the previous month.
Within this, the manufacturing index dropped by an even sharper 9.1% compared to March 2010.
While industrial production has not declined every month in the past year, the overall trend in teh first three months is downwards.
For the period January – March 2011, the industrial production index recorded a decrease of 3.2% compared to the same period of the previous year.
The latest national accounts figures show that industry as a proportion of GDP dropped from 13% in 1995 to 8.3% in 2010.
Pharmaceuticals shine
However, it would be too soon to write off the whole industry sector in Cyprus, for within these weak figures there are a couple of reasons to be cheerful.
Most notably, manufacturing of “Refined Petroleum Products, Chemicals and Chemical Products and Pharmaceutical Products and Preparations” rose in the first quarter by 9% compared with the same period of the previous year, having increased by 15.8% in 2010.
Foreign trade data suggest that this is mainly thanks to exports of pharmaceuticals, which for some years now have been our top merchandise export.
Our paper industry also seems to be healthy, with output rising by 13.4% over the year earlier in the first quarter, after an increase of 20.1% in 2010.
Manufacture of “Electronic and Optical Products and Electrical Equipment” rose by a respectable 3.6% in the first quarter, after growing by 8.9% in 2010.
The other reason to be optimistic is that these are sectors with a strong element of value-added, so are less vulnerable to cheap competition from elsewhere.
One fast-growing sector in the first quarter for which it would be too early to celebrate is the manufacture of “Textiles, Wearing Apparel and Leather Products”—one of the older manufacturing sectors in Cyprus.
Production in this subsector rose in the first quarter by 11% compared with the same period of the previous year, having dropped by 10.9% in 2010.
But this is largely owing to a very low baseline: in the first quarter of 2010 output in this sector tumbled by 34.1% and the sector as a whole has recorded only one year of growth since 2001.
Fiona Mullen
Sapienta Economics Ltd
www.sapientaeconomics.com
