The National Statistics Office published a set of data on the manufacturing sector last week. This data is based on a survey among 440 enterprises across all sectors of the manufacturing industry. The data refers to sales, wages and salaries, employment and investment and covers the first three months of this year. Data is also provided for comparison purposes for the first three months of 2003 and 2002. The overall picture that emerges from this data is a fairly positive one, denoting yet again a point that I have always insisted on, namely that we have a manufacturing sector that has proved resilient to the challenges of globalisation and increased competition coupled with the challenges of an international economic slowdown.
One very critical point needs to be made about this data. The first three months of this year represent the months just prior to Malta's accession to the European Union. A lot was stated about the threats that Malta's accession to the EU represents. Therefore one would have expected a shrinkage in activity in the manufacturing sector, as companies may have sought to divest themselves from activities in this sector. Increased activity in the manufacturing sector is an indication that firms currently operating in Malta believe that this sector shall continue developing in future and that it is capable to exploit the opportunities that EU accession has brought about.
Sales increased during the first three months of this year by 3.9 per cent when compared to the first three months of last year; after that they had increased by 3.7 per cent in the first quarter of 2003 when compared to the first quarter of 2002. Most sectors have registered increases in sales, reflecting increased activity across the board. It is also worth noting that even those sectors that are essentially local market-oriented, such as the food and beverages segment and the furniture segment, have registered interesting increases in sales. The food and beverages segment in fact registered a 7.4 per cent increase in sales.
Other sectors that have recorded a significant increase in the level of activity have been the electrical machinery and apparatus segment, the medical, precision and optical instruments segment, the chemicals and chemical products segment and the textiles and textile products segment. This last segment increased its sales by 85 per cent in the first three months of this year when compared to the same period in 2003.
It is also important to appreciate that in a lot of instances firms operating in Malta have been faced with demands from their customers to decrease prices or at best to maintain 2003 prices. The fact that sales have increased in nominal terms by 3.9 per cent indicates that the increase in real terms has been greater.
However, this increased activity did not result in increased employment, which is inclusive of all full-time employees, part-time employees and outworkers. We are therefore experiencing what has been termed in other countries as a jobless recovery. In fact employment decreased by 9.2 per cent in the first quarter of this year when compared to the first quarter of two years ago.
Just as most segments registered increases in sales, in this case most segments registered decreases in employment. The only exception is the medical, precision and optical instruments segment, which registered an increase in employment of 12.5 per cent over these last two years.
For those persons who lost their jobs, this recovery is meaningless. However, if we look at it from a macro point of view rather than a micro point of view, this recovery has meant that today the manufacturing sector is leaner, more productive and more efficient. Sales per employee have increased by 18.7 per cent from the first quarter of 2002 to the first quarter of this year. This should surely place it in a better position to face the pressures of increased competition.
Another measure of increased productivity can be the ratio between sales and the total amount of money paid in wages and salaries. Sales per each Malta lira paid in wages and salaries increased by 1.5 per cent over a two-year period. Sales per each Malta lira paid in wages and salaries had gone down in 2003 compared to 2002; thus the increase in 2004 over 2003 is even more pronounced. Total wages and salaries per employee increased by 17 per cent between 2002 and 2004, indicating that the increase in productivity was not achieved at the expense of employees' income.
The last indicator provided in the NSO data is investment. Even in this case the trend is very positive. Investment in the first quarter of this year reached Lm14.2 million compared to just under Lm11 million in the same period last year and Lm10.7 million the previous year. The increase in investment was mainly in one segment denoting an element of vulnerability of the Maltese manufacturing sector, resulting mainly from its relatively small size.
This level of resilience of the manufacturing sector provides a great deal of food for thought. It shows that the efforts made to help firms already operating here to expand while seeking to attract new activities that would eventually sprout into significant ones in future, have reaped the desired results. The requirement is therefore one - a collective effort to ensure that the manufacturing sector maintains its solid foundations such that it continues to be one of the key motors of our economy.