Manufacturing & Supply Chain

Ireland’s manufacturing sector crept back into contraction territory in March, according to the latest AIB Ireland Manufacturing PMI®. Intakes of new orders and manufacturing production both decreased on the month following some tentative signs of improvement in February and consequently, firms scaled back input purchasing further.

Spare capacity was evident within the sector, as indicated by the sharpest fall in backlogs since September 2011. More positively, price and supply pressures eased. Vendor performance improved while the rate of input cost inflation dipped to the slowest in the current 33-month sequence of increase.

Commenting on the survey results, Oliver Mangan, AIB Chief Economist, said: “The AIB Irish Manufacturing PMI eased back to 49.7 in March, having picked up in February to 51.3. Thus, the index remains in the narrow 48.7-51.8 range it has occupied over the past nine months, fluctuating around the 50.0 level that signals broadly stable business conditions. As has been the case for some time, the Irish March reading was again above the flash manufacturing PMIs for the US, Eurozone and UK. These printed at 49.3, 47.1 and 48.0, respectively, pointing to continued subdued manufacturing activity globally

“A primary factor behind the weakening in Irish manufacturing in March was renewed declines in both orders and output, reflecting subdued underlying demand conditions. New exports orders remained particularly weak as a result of sluggish global demand. With order books declining, spare capacity is becoming increasingly evident as backlogs of work continued their steep decline in March. Meanwhile, stocks of finished goods fell for the first time in eight months, while firms continued to scale back purchases of inputs.

“On a positive note, employment continued to expand, albeit at a modest pace, while supplier delivery times shortened as supply chain issues abate. Irish manufacturers continue to be optimistic about the future, with sentiment on the outlook for the coming 12 months remaining close to its highest level in the past year.

“There was a further marked easing of inflationary pressures in both input and output prices, amid reports of moderating raw material and energy prices. There was a particularly sharp fall in both the indices in March, which are now approaching levels that would signal a stabilisation in prices.”