Business Irish

Tuesday 21 August 2018

US tariffs hit Irish manufactures as output continues at a brisk pace

Stock image: PA
Stock image: PA
Ellie Donnelly

Ellie Donnelly

US tariffs have started to contribute to higher input costs for a number of Irish manufacturers.

In the latest Manufacturing Purchasers Managers Index (PMI) from specialist bank Investec there was an acceleration in the rate of growth in input cost inflation in July, which panellists attributed to higher prices for fuel, oil and plastics, although US tariffs were also credited by some respondents for contributing to higher costs.

Firms responded to this by raising output prices, although this, combined with volume growth, failed to prevent a sixth successive decline in the profitability index.

Overall, and the manufacturing sector continued to expand at a brisk pace in July, the Index found.

The headline PMI of 56.3 in July was slightly below June’s five month high reading of 56.6, but nonetheless it is comfortably above the series average.

Any reading over 50 is deemed growth.

Growth in new orders continued at a strong pace, driving by domestic demand, as the rate of increase in new export orders cooled to a three month low, signalling the second-slowest pace of growth in the past 12 months.

For a fourth successive month backlogs of work recorded only a slight uptick, which is likely explained by yet another decline in stocks of finished goods, the fifth in as many months, as manufacturers utilised inventories to help meet client orders.

Businesses also took on additional staff in July, extending the sequence of above-50 readings for that component of the release to 22 months.

The good weather in July had a mixed impact on output and new business for firms, with Philip O’Sullivan, economist with Investec, advising not to read too much into the monthly change in the headline PMI in July.

Looking forward, the future output index, which measures business confidence, dipped to an eight month low, however Mr O’Sullivan said that the above 50 reading signified strong optimism by panellists.

"While the international backdrop has become slightly more uncertain in recent times, we think the upbeat stance by manufacturers on the outlook remains warranted," Mr O’Sullivan said.

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