| 4.1°C Dublin

Concern as manufacturing sector contracts for first time in a year

IRELAND's manufacturing sector contracted last month for the first time in more than a year, hurt by a fall in new orders for factories.

Across the eurozone the 17 member countries recorded the sharpest contraction in new export orders since August 2009, a survey showed.

NCB Stockbrokers' Irish purchasing managers index (PMI) came in at 48.6, the first contraction since February 2012, bringing Irish manufacturing in line with the rest of the eurozone.

The purchasing managers index (PMI) measures the overall health of the Irish manufacturing industry on a single figure scale, a number over 50 means the sector is expanding, under 50 means it is shrinking. It's based on an extensive survey of business managers.

Ireland had outperformed the European average for more than a year, reaching a 15-month high of 53.9 in July of last year.

The index is seen as a key indicator of overall economic health and is a closely watched statistic.

"This is a disappointing release, with declines observed on the output, new orders and employment fronts," said Philip O'Sullivan, chief economist at NCB Stockbrokers.

"We will closely watch April's release to see if any of these trends have persisted into Q2, paying particular attention to see if the elevated macroeconomic uncertainty of recent days and weeks weigh on survey findings."

Weakness

The drop in production in March was mainly due to a fall in new orders for the second time in three months. Prior to this, new orders had grown for 11 successive months.

Worryingly, new export orders fell at the steepest rate since August 2009. That is in contrast to growth in new export orders recorded for each of the preceding five months.

Lower new orders from the UK were reported by a number of the purchasing managers surveyed, likely due to sterling's weakness against the euro.

Manufacturers reported the sharpest drop in employment since October 2011 last month, the second month to show an employment decline so far this year. This is a marked change to the 10 consecutive months of jobs growth recorded between March and December 2012.

Input costs have now increased for eight successive months, though this increase wasn't as steep as preceding months.

However, output prices for manufactured products declined for the third time in five months, impacting profitability. Panellists said they reduced prices because of strong competition and a weaker pound. Stocks of finished goods fell during the month, suggesting firms are selling off existing stock as well as decreasing output.

Manufacturing contributes around one-quarter of Ireland's gross domestic product, according to World Bank figures.

Irish Independent