Output slides for the third straight month in August
IRELAND'S manufacturing sector contracted for the third straight month in August, according to new figures released yesterday.
The figures mirrored similar reports in most other countries that showed factory activity worldwide has stalled, stoking fears that the global economy may be heading for another recession.
Surveys of company purchasing managers showed manufacturing contracted in the eurozone for the first time in almost two years last month, echoing earlier data from Asia, where new export orders fell sharply.
Britain's manufacturing sector shrank at its fastest pace in more than two years, hurt by a sharp drop in demand for exports, but factory activity unexpectedly stayed above the 50 level as global demand for US-made goods helped keep manufacturing from shrinking.
Finance Minister Michael Noonan and the Economic and Social Research Institute both warned yesterday that the Irish economy would suffer if the economies in our biggest trading partners stumbled.
The NCB Purchasing Managers' Index was 49.7 last month, just below the crucial 50 mark which signals that the economy is expanding.
The figure was marginally better than the 48.2 figure posted in July. The main reason for the decline was a fall in new orders -- the same reason cited for similar declines from South Korea to the eurozone.
Irish purchasing managers also lowered input buying and reduced inventories for the 40th consecutive month.
"New export orders expanded once again but new orders generally contracted for the third month in a row, signalling the weakness of the domestic Irish market," said NCB economist Brian Devine.
"We expect Ireland's main trading partners to slow into the second half of 2012, which will be a drag on Irish exports and growth."
"The key thing they show is that we are not out of the woods. The economies are very vulnerable to any shock, which at this moment in time there are a few of," said Jeavon Lolay at Lloyds Bank.
"What is happening in the eurozone is very important and in the US growth has weakened markedly in the last two quarters. There is a risk of a return to recession."
Evidence of this slowdown could be seen almost everywhere yesterday, leading to declines on most major stock markets during the morning. Many of the falls erased during the afternoon as news of the unexpectedly good US figures buoyed investors.
The Eurozone Manufacturing PMI fell to 49.0 in August from 50.4 in July, the first time since September 2009 that the index for the sector has fallen below the 50 mark that divides growth from contraction.
In a worrying sign for policymakers, the slowdown appears to be spreading.
German factories, which have been supporting growth in the bloc, eased off the accelerator and French manufacturing contracted for the first time since July 2009. Weak growth in the US and Europe has revived worries that they will slip back into recession, which would deal a heavy blow to Asia's export-driven economies.
"The West's deteriorating growth outlook is becoming an increasingly heavy burden to bear," said Donna Kwok, an economist with HSBC.