Business Irish

Saturday 23 August 2014

Manufacturing growth slows down to weakest pace in five months

Colm Kelpie

Published 04/02/2014 | 02:30

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John Concannon, owner of JFC in Tuam, Co Galway. Picture Ray Ryan
John Concannon, owner of JFC in Tuam, Co Galway. Picture Ray Ryan

MOMENTUM in the Irish manufacturing sector eased as 2014 opened, with growth slowing to its weakest in five months.

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The easing comes as manufacturing in the eurozone expanded last month at its fastest pace since May 2011, buoyed by robust activity in Germany. Greece also expanded for the first time in more than four years.

In the UK, the swift upturn in activity eased slightly in January but orders from home and abroad flooded in at a faster rate.

Business conditions in Ireland continued to improve as output, new orders and employment all increased again, according to the latest Purchasing Managers' Index.

But the headline reading fell back in January from December on the back of the weaker production growth.

Philip O'Sullivan, economist with specialist bank Investec, said the Irish findings represent a solid, if unspectacular, start to the new year for the sector.

"Broadly speaking, with activity having grown in every month since June 2013, the underlying trend remains intact," he said.

"Given the momentum building both at home and abroad, we do not envisage any reversal of this trend in the near term."

The PMI rate fell to 52.8 in January from 53.5 in December. PMIs are regarded as important forward-looking indicators of the health of an economy and are therefore closely watched by both economists and analysts.

New business increased at a pace that was only slightly weaker than that recorded in the previous month as firms reported improving client demand in both domestic and export markets.

The rate of growth in new export orders quickened to the fastest in three months, with the UK highlighted as one of the main sources of work.

Jobs were also created, with companies continuing to increase their employment in line with improved workloads. Purchasing activity decreased for the first time in six months during January, although just marginally.

Data from the eurozone suggests the recovery in the 18-member bloc may be beginning to bed in.

EXPANSIONS

The reading increased to 54 in January from 52.7 in December. The improved performance in manufacturing was underpinned by solid expansions in production, new orders and new export orders, all of which rose at the fastest rate since April 2011.

Greece's PMI moved back into growth territory for the first time since August 2009.

Germany reached a 32-month high at 56.5 while Spain, at 52.2, was at a 25-month high. Job losses slowed in France and Greece, but the Netherlands reported a decrease in staffing levels for the first time in five months.

Chris Williamson, economist with data company Markit, said the bloc's second largest economy, France, was showing signs of stabilising.

"However, perhaps the most important development in the report is the further revival of manufacturing in the region's periphery," he said.

"Both Italy and Spain are seeing robust growth of output and order books and the Greeks' rise above 50 for the first time since August 2009 is an important signal of how even the most troubled member states are returning to growth."

Meanwhile, growth in China's service sector slowed to a five-year low, putting the focus on concerns of a slowdown in Asia's economic powerhouse.

Irish Independent

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