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Irish industry survey hits Covid-era lows in July

Ireland’s PMI readings show the economy here is still expanding but those for the eurozone are now contracting

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AIB chief economist Oliver Mangan says 'inflationary pressures remain pronounced'

AIB chief economist Oliver Mangan says 'inflationary pressures remain pronounced'

AIB chief economist Oliver Mangan says 'inflationary pressures remain pronounced'

Irish factory output and new orders fell for the second month in a row in July as demand took a hit due to rising costs and a global downturn in activity.

Manufacturers put up prices once again to compensate, with inflation close to double digit figures .

AIB’s Irish manufacturing purchasing managers’ index (PMI) fell to 51.8 in July, down from 53.1 in June. Any reading over 50 indicates an expansion in activity.

While the headline figure was positive, it was the lowest reading since January 2021, when the country was in full lockdown. The index came in at 56.4 in May.

“The AIB Irish manufacturing PMI survey for July shows a continuing loss of momentum in the sector amidst a global slowdown in activity as demand weakens in the face of rising price pressures,” said AIB chief economist Oliver Mangan.

“Inflationary pressures remain pronounced, with prices rising at close to their fastest pace since the survey began in 1998.

“There were further marked increases in material, energy and labour costs, while the rate of output price inflation remained elevated.”

July’s PMI was bolstered by higher jobs numbers, larger stocks of finished goods, an uplift in pre-production inventories, rising prices and improving sentiment.

But hiring rose at its slowest pace since February 2021, while finished stocks rose for the first time in more than a year as firms built up buffers in case of future supply constraints.

Work backlogs decreased for the third month in a row as sales fell off, lowering production requirements.

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New export orders fell for the second month in a row as factory bosses reported dampening demand in key overseas markets.

Supplier delivery times were longer, indicating materials shortages and transport delays.

For the first time in over a year, goods producers bought less inventory due to falling demand and issues sourcing material – although stocks of purchases rose for the 16th month in a row, indicating stockpiling.

Costs rose again in July, at the same rate as in June, with manufacturers putting up prices for the 22nd month in a row and at the fifth-fastest rate on record.

But factory bosses are more hopeful for the next 12 months, counting on improving demand conditions at home and abroad, with sentiment picking up to a three-month high.

Meanwhile, the eurozone PMI fell to 49.8 in July, its first contraction since June 2020, adding to fears of a recession later in the year.

Lower sales, new orders and exports led to the largest ever rise in unsold stocks of finished goods ever recorded.

The UK’s index sank to 52.1 in July, with output and new orders declining at the fastest rate since May 2020.

“Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region's recession risks,” said Chris Williamson, chief business economist at S&P Global.

Production fell in Germany, France and Italy, the bloc's three biggest economies, and it was only positive in the Netherlands.

 


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