Saturday 21 October 2017

Manufacturing sector grows for first time in four months

Peter Flanagan

Peter Flanagan

THE manufacturing sector grew for the first time in four months during June, but only just, as employment levels rose.

The latest Investec Manufacturing Purchasers Managers Index (PMI) climbed to 50.3 last month, up from 49.7 in April.

The PMI is considered one of the most important regular measures of economic growth. A figure above 50 indicates expansion, under 50 reflects contraction in the sector.

While the top-line figure is positive, the report paints a decidedly mixed picture about the state of manufacturing in Ireland. The level of new orders for the domestic sector barely moved, while new orders for overseas markets fell, reflecting the wider fall in exports this year.

Companies' backlogs of work and "stocks of finished goods" – essentially a measure of company inventories – fell sharply. That implies that companies are running down their existing supplies rather than dealing with an increasing order book.

Importantly, more firms are taking on staff, with around 19pc of those surveyed increasing their employee numbers during the month.

Despite the weakness in some areas, Investec Ireland chief economist Philip O'Sullivan said the PMI showed a "welcome return to growth" and suggested this could be the start of a sustained improvement for the sector.

"This represented the first strengthening of operating conditions since February, although the improvement was only marginal," he added.

"While new orders remained in sub-50 territory for a fourth successive month, the decline here was only marginal and the slowest in the current sequence.

"Somewhat surprisingly, given the easing of some of the macroeconomic pressures that were cited by Irish manufacturers as headwinds in reports earlier this year, the rate of contraction in new export orders quickened slightly over the month."

The return to growth will be welcomed in government, especially after the CSO confirmed last week that Ireland returned to recession in the first three months of the year – just as manufacturing fell into decline.

Irish Independent

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