Monday 23 April 2018

Irish factory growth hits slowest pace in 15 months

Philip O'Sullivan from Investec
Philip O'Sullivan from Investec
Colm Kelpie

Colm Kelpie

Manufacturing growth in Ireland eased to its slowest last month in more than a year and a half.

New orders have now risen throughout the past two years, and while the latest expansion was sharp, it was the weakest since February of last year, according to the latest Purchasing Managers' Index for the sector.

The softness appears to be coming from domestic clients, as export orders continued to rise strongly, slowing just fractionally over the previous month.

Philip O'Sullivan, economist with specialist bank Investec, said it was encouraging to see firms continuing to increase their staff levels.

"Overall, while most of the indices point to a slower finish to the second quarter, our sense is that activity levels for Irish manufacturing firms are likely to pick up again in the third quarter, assuming that the fallout from Greece is contained," he said.

"Markit's Eurozone composite PMI recently improved to its highest level in more than four years, while the single currency's continued weakness against both the dollar and sterling augurs well for exports to the US and UK, two critical markets for Irish exporters."

The seasonally adjusted PMI index posted 54.6 in June, down from 57.1 in May. Anything above 50 represents expansion.

Although registering a slowdown, the Irish data was stronger than that of the Eurozone as a whole.

Activity across the block picked up slightly last month but remained tepid as uncertainty around Greek debt talks - and the country's possible exit from the bloc - swept across the region.

The Eurozone index nudged up to a 14-month high of 52.5 last month from May's 52.2, in line with a preliminary reading published before the fears intensified.

Further expansion was also curtailed by lacklustre growth in Germany and France, the Eurozone's two biggest economies, and Markit - which compiles the data - said manufacturing provided only a modest boost to the wider economy.

The strong pound dented Britain's manufacturing sector.

British manufacturing growth slowed unexpectedly to its weakest rate in more than two years in June, dented by subdued export demand from Europe in the face of the rising value of sterling.

The UK manufacturing sector had a disappointing second quarter overall," said Rob Dobson, economist at Markit.

"Growth trends in output and new orders were the weakest since the opening quarter of 2013, as a strong sterling exchange rate and subdued demand from mainland Europe offset the continued solidity of the domestic market."

In Ireland's case, employment in the sector continued to rise. The latest increase was sharp, despite easing to the slowest since January.

Ireland's report said Input prices rose sharply in June, and at the sharpest pace in 21 months. The recent weakness of the euro against both sterling and the US dollar was a key factor leading input costs to rise, according to respondents.

In spite of higher input prices, firms lowered their charges. The fall in output prices ended a two month sequence of inflation.

"Notwithstanding the above, it is encouraging to see that firms continued to increase their staffing levels in June, albeit at the slowest pace in five months," Mr O'Sullivan added.

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