Monday 28 May 2018

Optimism rises as wages fall and output hits 11-year high

Marc Coleman, Newstalk economics editor; Anglo Irish chairman Alan Dukes; Pat McArdle, independent economist, and Frances Ruane, ESRI director
Marc Coleman, Newstalk economics editor; Anglo Irish chairman Alan Dukes; Pat McArdle, independent economist, and Frances Ruane, ESRI director

Donal O'Donovan and Thomas Molloy

THE business community is experiencing "quite a bit of optimism" as exports rise, wages fall and workers' productivity surges, IBEC boss Danny McCoy told a conference yesterday.

Mr McCoy was speaking hours after new figures showed Irish manufacturing output hit an 11-year high last month as booming exports finally began creating new jobs.

The NCB Stockbrokers Purchasing Managers' Index shows Irish manufacturing activity rose to 56.7 last month from 55.8 in January.

The index measures activity on a scale either side of 50. Decreases in activity are recorded from 50 down and increases from 50 up. The latest numbers mean the sector saw five months of uninterrupted growth.

"The sector built on a strong start to 2011 in February, with growth of output, new orders and even employment all accelerating over the month," said Brian Devine, economist at NCB Stockbrokers.

Mr McCoy said business is making huge investments in machinery to make goods for export in both the hi-tech and traditional sectors.

The increases in productivity have not yet been captured in official figures but help to explain why IBEC's business confidence indicator has been rising steadily.

Driver

The key driver of growth in yesterday's purchasing manger's index was exports, with new export orders rising at the second-fastest rate ever.

Employment growth reached to a four-and-a-half year high in February as those orders finally saw businesses take on new staff to meet the rise in demand.

Like elsewhere in Europe though, companies in Ireland are facing rising cost pressures. Inflation that is rising even while Ireland remains in recession could hurt the rise in exports.

Managers said that higher raw materials costs pushed input inflation in February to the highest level for almost four years. That forced manufacturers to raise their prices, undermining some of the productivity gains made over the past two years. Across Europe manufacturing growth accelerated to the fastest pace in more than 11 years in February, according to euro-area PMI figures.

Research by London-based Markit Economics found that manufacturing PMI for the entire euro area rose to 59 in February from 57.3 in January. It is the highest level since June 2000.

The core economies of Germany, Austria and the Netherlands led last months growth but Ireland and Spain were among the gainers with only Greece recording a decline in output. Increased growth as well as rising oil and commodity prices pushed inflation to new highs in many economies. Of countries that recorded a rise in output only Ireland did not see record inflation, according to Markit.

Irish Independent

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