Manufacturing in Ireland Sees Modest Rise

September 04, 2012 /

Operating conditions in the Irish manufacturing sector continued to improve in August, albeit to a lesser extent than seen in the previous month.

Slower increases were recorded in output, new orders and employment. Meanwhile, input costs rose for the first time in three months but firms continued to lower their prices charged.

Cathal O’Leary, Head of Fixed Income at NCB Stockbrokers said: “Respondents pinpointed new business orders
(51.8) as a key driver of higher production levels (51.0) during the month. The sustained strength in
new export orders (53.4) is reassuring, while employment (51.1) expanded for the sixth month in a row.”

The seasonally adjusted NCB Purchasing Managers’ Index (PMI) posted 50.9 in August, down from 53.9 in July. Although remaining above the 50.0 no-change mark, the latest improvement in operating conditions signalled by the PMI was only slight, and the weakest in four months.

Manufacturing output continued to rise in August, extending the current sequence of growth to four months. That said, the latest increase slowed from the solid pace seen in July. Panellists linked higher output to rising new business.

New orders increased for the seventh successive month, although in line with the trend seen for output the rate of expansion eased. New export orders also rose, and at a solid pace. In spite of new order growth, manufacturers continued to work through outstanding business in August. The latest depletion of backlogs was marked, and broadly unchanged from July.

Employment increased for the sixth successive month in line with improved demand and work on new products. However, the rate of job creation slowed to the weakest in the current sequence of rising staffing levels.

August saw a return to cost inflation in the sector, with a sharp rise in input prices ending a two-month
sequence of falling cost burdens. Higher fuel and raw material costs were signalled by clients, while a
weaker euro had reportedly contributed to increased import prices.

Firms continued to lower their output prices, however, amid intense competition. Charges have now decreased in 12 of the past 13 months, although the latest fall was only slight.

After rising in the previous five months, purchasing activity decreased marginally in August. Weaker
new order growth had reportedly led firms to hold off on purchases during the month. Meanwhile, suppliers’ delivery times were broadly unchanged.

A modest fall in pre-production inventories was recorded following a rise in the previous month. Stocks of finished goods decreased, but at a marginal rate that was the slowest since July 2011. Higher sales was partly behind the reduction in post-production inventories.

O’Leary said: “After two consecutive months of negative growth, input prices (56.8) reverted to trend. On the cost side, higher fuel prices, raw material costs and the weaker euro proved headwinds for anufacturers
and are likely to continue to do so.”

 

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