Wednesday 21 March 2018

Recovery in manufacturing sector takes a hit

Thomas Molloy

A rebound in the manufacturing sector earlier this year is spluttering at the moment with employment in the sector sinking once again while both output and new business increased at slower rates in July than previous months, according to the monthly PMI survey.

The seasonally adjusted NCB Purchasing Managers' Index (PMI) -- an indicator designed to provide a single-figure measure of the health of the manufacturing industry -- fell for the second month running. The index was at 51.4 in July, down from 51.8 the previous month.

The rate of strengthening was the weakest in the past five months although any figure above 50 suggests an improvement in the sector.

"Manufacturing firms continue to expand output, albeit at a slower pace than in the preceding number of months," said NCB Stockbrokers economist Brian Devine.

"The headline composite index is being dragged back towards the dividing 50 mark, which signals contraction, by new orders and employment."

New export orders increased for the ninth month in a row, fuelling hopes that the economy will expand this year and next on the back of fresh demand for products made by Irish companies and multinationals with operations here.


"The principal cause of the latest expansion was strengthening global demand, while some panellists mentioned higher new orders from the UK in particular," Mr Devine said.

There was further evidence of spare capacity in July, with both outstanding business and employment decreasing.

Backlogs of work fell for the fourth month running, while the second consecutive reduction in staffing levels reflected the fragility of demand, NCB said.

Input costs rose sharply again in July, mainly as a result of increased raw material prices.

However, the rate of inflation eased to its lowest in three months. Although input costs rose substantially, Irish manufacturers reduced their output charges under pressure from clients.

The first decrease in output prices since April was only marginal as firms sought to pass on higher raw material prices.

Reduced capacity at suppliers led to the fastest deterioration in vendor performance in the history of the series, extending the current period of lengthening lead times to eight months.

Purchasing activity increased for the fifth month running in July. Despite this, stocks of purchases continued to decrease markedly.

Pre-production inventories have fallen throughout the past 32 months.

Irish Independent

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