Manufacturing & Supply Chain

The July AIB Ireland Manufacturing PMI® indicated a broad stabilisation in operating conditions across the Irish manufacturing sector at the start of the third quarter, thereby ending a four-month period of deterioration. Underlying data hinted at early signs of recovery in demand conditions. Meanwhile, output was raised for the first time since February.

However, latest data also signalled a jump in cost burdens, with input prices rising at the sharpest rate for 17 months. While stronger cost burdens failed to fully feed through to charges, they will need to be monitored closely in order to assess inflationary concerns.

Commenting on the survey results, David McNamara, AIB Chief Economist, said: “The July AIB Irish Manufacturing PMI shows a slight recovery in activity in the sector, with the headline index rising to 50.1 in July from 47.4 in June. The marginal improvement in the health of the Irish manufacturing sector was driven by a renewed rise in output and accelerating jobs growth, while the contraction in new orders eased on the month. The Irish manufacturing PMI remains above the flash July readings for the Eurozone and US at 45.6 and 49.5, respectively, but below the UK at 51.8.

“Output rose marginally in July following four months of contraction, albeit respondents reported continued weak client demand. This was reflected in a further fall in new orders, albeit the rate of contraction eased compared to June. Firms linked this drop to the current economic climate which has impacted both domestic and foreign demand. This was also reflected in new export orders, with the respective seasonally adjusted index coming below 50 for the sixth successive month. Demand from the US, UK and Germany were cited as key sources of weak demand. Stocks of both inputs and finished goods fell again due to the declining levels of new orders and at an accelerated pace in July. Delivery times were unchanged, while a further contraction in purchasing activity was also evident.

“Hiring picked up in July, with firms expecting a stronger growth picture in the coming months and taking on more full-time hires. Irish manufacturers maintained a positive outlook regarding activity over the coming 12 months, with sentiment improving on the month. Positive expectations stemmed from hopes of a brighter economic picture in the near term.

“Price pressures remained a concerning feature of the survey in July. Input price inflation accelerated to a 17-month high, reflecting higher raw material and transport costs. Output price inflation also rose, as firms attempted to pass on higher input costs, but the rate of inflation eased on the month.”