Saturday 3 December 2016

New orders on the rise despite UK fallout fears

Published 02/09/2016 | 02:30

New orders in August returned to growth after contracting for the first time in three years in July. Photo: PA
New orders in August returned to growth after contracting for the first time in three years in July. Photo: PA

The manufacturing sector has beaten off Brexit uncertainty to record an increase in new orders during the month of August, new figures have shown.

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However, the closure of a mushroom manufacturer in Tipperary shows that Brexit is an issue for exporters, after the company cited weak sterling as its reason for winding up.

The headline reading for the industry increased to 51.7 last month as opposed to July's 50.2 figure, according to the latest Investec Manufacturing PMI.

Despite the growth, the report notes an understandable mood of caution among manufacturers given the current economic climate.

New orders in August returned to growth after contracting for the first time in three years in July.

However, growth in the area was small with around 75pc of panellists citing either unchanged or lower client demand.

New export orders contracted again for the third time in the last four months. Backlogs of work fell for the eighth month in a row and at the fastest pace for more than three years.

Investec chief economist Philip O'Sullivan said: "While we welcome the slight improvement in the headline PMI, manufacturers' preference for running down inventory levels points to a more cautious stance regarding the outlook, a sentiment that chimes with our own assessment of the sector's near-term prospects."

The PMI also revealed that companies are still willing to take on more staff, but they remain very cautious on their management of working capital. In August, firms' stocks of finished goods contracted for the fifth month in a row, while pre-production inventories have continued to slide for the fourth month in a row.

Growth in cost inflation during the month quickened due in the most part to higher food and commodity prices.

Manufacturing companies passed some of this on to end-consumers after notching a third successive month of increased output prices.

Businesses purchased less for the second month in a row in August with a number of firms highlighting their weariness over negative expectations around production.

The drop-off in purchasing was compounded by a sharp fall-off in backlogs of work. This was the eight consecutive drop-off in outstanding work and the most severe fall since 2013.

The primarily positive outlook follows the closure of Tipperary's Schiele and McDonald Mushrooms, largely believed to be the first Irish casualty of Britain's decision to leave the European Union.

The firm's managing director, Peter McDonald, said it has been losing over €10,000 a week since the Brexit vote after being battered by the dramatic fall in the value of sterling.

Irish Independent

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