Manufacturing sees expansion for first time in two years
THE MANUFACTURING sector expanded for the first time in more than two years last month, new figures show.
The Purchasing Managers Index (PMI), compiled by NCB stockbrokers, rose to 53 in March -- the highest since 2007. In February, the PMI was at 48.6.
The PMI is based on a survey of managers in the manufacturing sector which allows the health of the industry to be measured with a single number. A mark of 50 or over indicates growth; less than 50 suggests activity is declining.
According to the survey, Irish manufacturing output increased considerably in March, after three months of contraction.
The rate of expansion was the fastest in 45 months, while the growth apparently was driven by a host of new businesses.
"The most encouraging thing about this month's survey was that those questioned indicated that demand had strengthened in domestic as well as foreign markets. New export orders grew at the strongest rate since the survey began in 1998," said NCB.
The New Orders Index jumped nearly 15 points to 60.9 -- the highest in two-and-a-half years.
Brian Devine, an economist with NCB, was not surprised to see the PMI move back into positive territory.
"The PMI tends to follow the New Orders Index and that index saw the steepest increase for 30 months, so it was expected that the PMI would enter positive territory," he said.
"Historically, once the index moves past 50 it tends to stay there for a sustained period of time.
"Around the world that tends to be the case, so we expect it to be the same here," he added.
Mr Devine also pointed to the Stocks of Finished Goods Index, which measures the level of inventory companies have as an indication of firms doing more business. A low number is considered positive. That declined slightly to 41.9 having risen in February.
Employment continued to fall however, and although the rate of cuts eased somewhat, the economy remains fragile.
"Net job creation is not expected to return until 2011, (while) construction investment will be severely curtailed and government spending will be retrenching in response to the fiscal situation," said Mr Devine.
"In 2010 we expect extremely weak domestic demand to counterbalance a large contribution from net exports on the back of global reflation," he continued.
NCB forecasted Gross National Product (GNP) to fall by 0.5pc this year before growing 2.8pc in 2011.