Business Irish

Sunday 18 February 2018

Irish manufacturing strengthens to two year high in August

Manufacturing activity in Ireland hit a two year high in August. Stock image: PA
Manufacturing activity in Ireland hit a two year high in August. Stock image: PA
Ellie Donnelly

Ellie Donnelly

Growth in the Irish manufacturing sector hit a two year high in August, with sharp and accelerated expansions in both output and new orders recorded, according to the latest Investec Manufacturing PMI Ireland report.

The increased demand came from both domestic and overseas clients.

The growth has resulted in manufacturers hiring additional staff.

The data also pointed to a sharp increase in purchasing activity at Irish manufacturing firms, with the rate of growth the fastest in three months.

In August the PMI strengthened to 56.1 from July’s 54.6 outturn. Anything above a mark of 50 is deemed growth.

Growth in new orders has quickened at the fastest rate since January, as Irish manufacturers continue to display resilience against possible negative impacts of Brexit and currency fluctuations.

In turn, the higher demand contributed to an increase in backlogs of work – the fourth in as many months.

The increased demand put pressure on supply chains, with vendor delivery times lengthening to the greatest extent since April 2011.

On the margin side, the rate of input cost inflation ticked up in August, led by higher raw materials costs. However, manufacturers were able to pass on at least some of this pressure by hiking output prices, as they have done for 15 months now.

The ability to pass on cost pressures was highlighted in the profitability index which showed that earnings have increased in four successive survey periods for manufacturers, with August’s outturn the best seen since the three months to April 2015.

Looking forwards, approximately nine in ten panellists expect to see flat or rising output over the next 12 months.

"Given the improving international economic backdrop we think that Irish manufacturing firms are right to be upbeat about the outlook," Philip O'Sullivan, Investec Ireland's chief economist, said.

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