'Positive' start to 2018 for manufacturing sector
Strong demand from domestic and overseas customers has resulted in the manufacturing sector starting 2018 with a 'positive' performance.
The latest Investec Manufacturing PMI Ireland report found that there was an 18th successive monthly increase in new orders recorded, while new export orders rose at a slightly faster pace than the exit rate for 2017.
While the headline PMI eased slightly from the all-time high of 59.1 that was recorded in December, January’s 57.6 reading is consistent with a sharp improvement in activity.
The responses to this higher demand were predictable. The quantity of purchases index posted a 17th successive above-50 reading, with the sequence of growth in employment just one month shorter.
Despite these additional resources, backlogs of work rose at a pace that was little-changed from the preceding two months, the report found.
And the signs are positive that manufacturers expect the strong performance in the sector to continue.
"There is evidence that manufacturers are positioning themselves for ongoing strong customer demand in the months ahead, with stocks of purchases increasing," Philip O'Sullivan, chief economist with specialist bank Investec, said.
"We also note that the future output index of expectations increased at its fastest pace in 14 months, which suggests that December’s record Manufacturing PMI reading may be eclipsed in the coming quarters."
Meanwhile stocks of finished goods rose for a third successive month.
Turning to margins, input prices rose at their sharpest rate since February 2017 last month, with panellists blaming higher commodity prices including oil and steel for this.
Efforts from manufacturers to pass on the higher output prices appear to have been met with mixed results, with only one-in-ten panellists achieving higher like-for-like selling prices in January compared to in the previous month.
Not withstanding this, the profitability index remained in positive territory for a ninth successive survey period, buoyed by volume growth.
The report also noted the IMF’s World Economic Outlook release last week, in which the body upgraded its global growth forecasts by 20bps to 3.9pc for each of 2018 and 2019.
This follows estimated growth of 3.7pc in 2017.
"The stronger backdrop augurs well for the Irish manufacturing sector, which is highly leveraged to international events. We expect to see further strong Manufacturing PMI readings as 2018 progresses," Mr O’Sullivan said.