New high for jobless figure after unexpected sector drop
Manufacturing takes a hit as output and orders slow down
THE fragile state of the economy was highlighted again yesterday, as the manufacturing sector stumbled unexpectedly, helping to push unemployment to a new high, as a leading businessman said he doesn't expect the economy to grow this year.
The latest data from the NCB Purchasing Managers' Index suggested the manufacturing sector was growing at the slowest rate since November as output and new orders slowed.
This prompted firms to cut jobs and purchasing levels and pushed the index down to 51.8 last month, from 56 in April. Separate figures from the Central Statistics Office yesterday showed employers shed 2,600 jobs last month, pushing unemployment to a new high.
NCB Stockbrokers' Brian Devine said the new purchasing managers' index painted a "worrying" picture. Manufacturing has been a rare chink of light for the economy, which is being hammered by consumers who fear for their jobs and remain reluctant to spend.
Prices of raw materials rose sharply again last month, with companies blaming higher oil and steel costs. The only bright spot was in new export orders, which expanded strongly and at a much faster pace than overall new orders as demand from Britain remained strong.
The latest figures will give cause for thought to the Government and bolster the views of organisations such as the OECD, which believes the economy will stagnate this year; and Ernst & Young, which believes it will contract.
Irish Continental Group boss Eamonn Rothwell said yesterday that he expected no Irish economic growth this year, though there were "pockets" of strength, such as in exports.
Surveys from China to the rest of the eurozone painted a similar picture of disappointing growth. All of Ireland's major trading partners saw manufacturing activity weaken in May, while some trading partners such as Australia and Denmark have seen growth shrink in the first quarter of the year.
The purchasing managers' index for the euro area showed the slowest pace of expansion in seven months, while the equivalent measure for China fell to a nine-month low. The US gauge of factory growth was at its weakest in a year. Russia's index signalled "near stagnation", and reports from Poland to Hungary also showed a loss of manufacturing momentum.
"We can see some slowing momentum globally," said Ralph Solveen, an economist at Commerzbank in Frankfurt, Germany. "Export demand won't be quite as dynamic as before. I don't see any collapse, however."
In Britain, manufacturing activity grew at its slowest pace in 20 months and mortgage approvals unexpectedly fell to their lowest since December.