Manufacturing & Supply Chain

Amid ongoing demand weakness, Irish manufacturing firms continued to see a decline in the health of the sector during June. Downturns in new orders and output were both sustained with the rate of contraction in the latter the sharpest since February 2021, according to the AIB Irish Manufacturing PMI for June 2023.

Firms responded accordingly by cutting back their buying activity at the steepest pace for three years. Employment numbers were down for the first time in seven months as firms were increasingly reluctant to replace voluntary leavers. Meanwhile, cost pressures continued to ease, as reflected in the sharpest fall in selling prices since February 2016.

Commenting on the survey results, Oliver Mangan, AIB Chief Economist, said: “The AIB Irish Manufacturing PMI for June indicates that the sector remained in contractionary territory at the end of the second quarter. The headline index registered a reading of 47.3 in June, which was slightly below the 47.5 level it recorded in May and marked the fourth consecutive month of contraction. The contraction in Irish manufacturing activity is in line with the trend in most other economies, amid a global downturn in the sector. The flash June Manufacturing PMIs for the Eurozone, UK and US slipped further to 43.6, 46.2 and 46.3, respectively.

“Irish manufacturing continued to be hampered by subdued demand, including in overseas markets. This was reflected in new orders falling for a fourth month in-a-row, with export orders contracting for a thirteenth successive month. The weakness in demand, meant that production continued to be scaled back, and is now at its lowest level since early 2021.

“Amid the lower level of production, firms continued to scale back their purchases of inputs, with June seeing the sharpest pace of reduction in three years. Spare capacity continued to be evident in the sector as backlogs of outstanding work maintained their steep downward trend.

“Against the backdrop of weaker activity levels, employment decreased for the first time in seven months, with the rate of decline, the sharpest in nearly three years.

“Despite the more challenging market conditions, Irish manufacturers continue to be optimistic about the future, with
confidence rising to a three month high.

“Meanwhile, the weaker demand dynamics in the sector resulted in a further marked easing in inflationary pressures. Input prices fell for the third consecutive month, driven by falls in raw material and energy prices. A combination of reduced inputs costs and increased competition saw output prices decrease again in June.”