Friday 19 January 2018

Irish production expands but major economies suffer slump

Peter Flanagan

Peter Flanagan

IRISH manufacturing bucked a dismal global trend last month by expanding, while slumps in the major economies increased fears of a prolonged downturn.

The NCB survey of purchasing managers in Ireland showed manufacturing growing at a faster rate in May than April.

Its Purchasing Managers Index (PMI) topped 51.2 in May, an increase of one point, where any figure over 50 indicates growth, while less than 50 shows contraction.

The overall index has now shown growth for three months in a row, but a similar index for the eurozone as a whole showed contraction for the 10th month running.

The survey of 3,000 eurozone manufacturing firms gave the lowest reading since mid-2009.

"The eurozone's biggest economies -- Germany, France, Italy and Spain -- are now reporting worryingly sharp downturns in their manufacturing sectors," said Chris Williamson, chief economist at the Markit organisation, which conducted the poll.

"But the situation is perhaps now the most intense in Spain, where the PMI fell below that of Greece to signal the steepest deterioration of business conditions of all countries surveyed."

The German activity index fell 1pc to 45.2 for its lowest level since December 2009, while crisis-hit Spain declined 1.5pc to 42.

The Irish survey showed not just growing output but a sharp increase in industrial employment. That index rose to 54.4 from 52.9 in April. That index has increased every month since March.

NCB Stockbrokers economist Brian Devine said the continued rise in employment was the "most surprising aspect of the report" and claimed overall employment growth seemed to be continuing.

"More firms expanded than cut employment, and did so at the sharpest pace since March 2011. There was a 2.4pc quarter-on-quarter increase in industrial employment in the last three months of 2011, according to the official statistics.

"The evidence from the PMIs would suggest that this trend has continued into 2012," he said.

New orders, orders for export and quantity of purchases all rose during the month, while inventories fell -- a positive for the main index.

"For the second time in the past three months, suppliers' lead times shortened marginally in May. Manufacturers in Ireland increased their input buying for a third successive month in May, mainly in response to higher workloads.

"Rising new business also contributed to a marked slowdown in the pace of depletion of stocks of purchases, which fell at the weakest pace since June 2011.

"The rate of decline in stocks of finished goods also slowed during the month, and was only slight.

"Respondents indicated that higher sales in recent months had been partly behind the fall in stocks and a depletion of outstanding business also supported output growth in May, with backlogs decreasing at the sharpest pace since January."

Analysts said the eurozone crisis was hurting manufacturing elsewhere. China's PMI slid to 50.4 from 53.3. That was the weakest Chinese output had been since December.

Manufacturing in Britain shrank at its fastest pace in three years, prompting calls for more "quantitative easing" from the Bank of England to released money into the economy.

Manufacturing in the United States continued to grow, but at a slower pace, falling to an index of 53.3 after hitting a 10-month high of 54.8 in April.

"Things are turning down again and the underlying state of every economy is pretty ropey," said Rob Carnell, chief international economist at ING Bank in London.

"The world may avoid recession, but large chunks of it will remain in it."

Irish Independent

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