Ireland manufacturing PMI rose for third consecutive month in December

Markit Research

The recovery in the Ireland manufacturing sector continued in the final month of the year, with both output and new orders rising at solid rates and employment increasing. The improvements were recorded despite disruption caused by poor weather conditions.

The seasonally adjusted NCB Purchasing Managers’ Index (PMI) – an indicator designed to provide a single figure measure of the health of the manufacturing industry – rose for the third month running to 52.2 in December, from 51.2 in the previous month, to register a modest strengthening of operating conditions in the sector. Moreover, the improvement was the most marked since May.

Solid output growth was recorded in December, in line with rising new business from both domestic and overseas markets. Production has now increased in each of the past ten months, with the latest rise the steepest since June.

Overall new order growth expanded in December, while new export business continued to increase at a solid pace. Those panelists reporting higher new orders from abroad highlighted Asia, the Middle East and the United States as sources of growth. Despite higher new business levels, work-in-hand fell further. However, the reduction in backlogs in December was the slowest since July.

Irish manufacturers raised employment for the first time in seven months, albeit at only a marginal pace. The rise in staffing levels mainly reflected increased workloads.

Input price inflation remained elevated in December, despite easing slightly over the month. Raw material prices were the main source of input cost inflation, with higher oil-related prices also mentioned. In contrast to the rise in input costs, Irish manufacturers lowered output prices over the month as firms offered discounts in an attempt to stimulate new business. The fall in charges was the third in the past four months.

Poor weather conditions were the key factor behind December’s deterioration in vendor performance. Lead times lengthened markedly, albeit at the slowest pace in nine months.

Purchasing activity rose for the tenth consecutive month in December, and at a solid pace that was the steepest since April. According to respondents, the rise was mainly due to increased new order levels.

Despite higher purchasing, stocks of inputs decreased as inputs were utilized in the production process. However, the fall was the weakest in 31 months. Stocks of finished goods also decreased, with the marked reduction largely due to stocks being used to help meet increased sales.

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