NCB figures show Irish economy has contracted for second month
THE economy showed signs of contracting for the second straight month as demand weakens across the globe, according to new figures.
Bloomberg and Reuters reported yesterday that the NCB Purchasing Managers' Index fell to 48.2 in July from 49.8 the previous month. Any measure below 50 suggests the economy is contracting.
A spokesman for Merkit, which compiles the index, declined to give any further details, saying the closely watched figures were due to be released today and had been released early by mistake.
The Central Bank tweaked its growth forecasts on Friday and now expects gross national product to shrink by 0.3pc. If the forecasts are accurate, this suggests the economy will contract once again this year.
Signs of economic decline were to be found everywhere yesterday. Manufacturing indexes from Asia to Europe fell last month as the global recovery lost momentum. The US, Russian and Australian manufacturing indexes shrank last month, while the pace of factory growth slowed in Europe and China, according to surveys.
Europe's debt crisis, US haggling over debt limit and monetary tightening in China have combined to restrain the global recovery. Consumer confidence is being undermined by job cuts and government austerity measures, while manufacturers may also struggle to recover as soaring commodity prices weigh on margins.
"Manufacturing is slowing and some of these readings are in recessionary territory," said David Owen, chief European economist at Jefferies International in London.
In the US, the index fell to its lowest level in two years, pushing down shares on Wall St which has opened 1pc higher.
In Europe, "the optimistic interpretation is that the slowdown still reflects temporary factors" such as debt crises and the Japanese earthquake, according to Jens Sondergaard, senior economist at Nomura International in London.
"A more pessimistic interpretation is that today's numbers are the first signs that the near-term economic outlook is significantly worse than our central case," he said.
The International Monetary Fund said in a separate report yesterday that the UK, Ireland's largest trading partner, should cut taxes while the Bank of England should take more steps to pump money into the economy if Britain looked to be heading into a long phase of weak growth.