Monday 14 October 2019

Manufacturers raise stock levels at record pace as Brexit looms

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Ellie Donnelly

Ellie Donnelly

With just 28 days to go before Brexit stocks levels among Irish manufacturers grew at a record pace last month.

This is according to the latest Manufacturing Purchasing Managers Index (PMI) from AIB.

The PMI, an indicator designed to provide a single-figure measure of the health of the manufacturing industry, posted 54 in February, up from 52.6 at the start of 2019.

Any reading over 50 is deemed growth.

Attempts to mitigate potential supply disruption from Brexit translated to holdings of stocks during February.

Preproduction inventories increased at the fastest rate in the near 21-year PMI history. Stocks of purchases have now risen in 11 of the past 12 months.

The record accumulation of pre-production inventories was supported by the fastest rise in purchasing activity in over 19 years.

A number of panellists surveyed as part of the Index said they had brought forward purchases of inputs in order to secure raw materials in case of any stock problems resulting from Brexit.

Additionally, some companies had raised their buying activity due to stronger customer demand.

Commenting on the Index, Oliver Mangan, AIB chief economist, said: "The impact of Brexit was evident in many of the components of the PMI as some firms moved to take action to avoid possible disruption to supply chains."

"Some firms also reported rising demand from the UK ahead of Brexit."

However, Mr Mangan added that uncertainty about Brexit saw business optimism slip to its lowest level in 18 months.

Elsewhere, and post-production stocks increased for the third month running in February.

The rate of accumulation was sharp and the fastest in 13 months.

A number of panellists indicated they had built stocks in order to delays resulting from Brexit.

Central to the improvement in overall manufacturing operating conditions were faster increases in output and new orders.

Growth of new work quickened from January amid reports from panellists of greater domestic and international demand, notably from the US and UK.

Despite faster new order growth, manufacturers depleted their backlogs of work for the sixth consecutive month.

Manufacturers responded to higher new orders by raising production for the thirty-first successive month.

Additionally, employment growth quickened to a four month high, amid reports of greater customer demand.

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