The Irish manufacturing sector expanded for the 41st month in a row in January, as indicated by the seasonally adjusted NCB Purchasing Managers’ Index registering 52.3. However, the PMI – an indicator designed to provide a single-figure measure of the economic health of the manufacturing industry – signaled a slower rate of expansion than in December, and one that was weaker than the average for the current growth period.
“Manufacturing output continued to grow as it had done in the previous 40 months, but the pace of growth is stable rather than accelerating,” said Eunan King, senior economist at NCB Stockbrokers. “While output is still expanding at a respectable pace orders, especially export orders are not very supportive. Moreover, backlogs continued to fall, while employment growth was only marginal in January. Output prices continued to grow and input prices reaccelerated, following a few months of more modest inflation.”
Output and demand
Productivity improvements and growth of new business contributed to a robust increase in output at Irish manufacturers in January. Production has now increased in each month since September 2003, with the latest rate of growth broadly unchanged since the previous month and above the average for the current expansionary period.
Irish manufacturers’ new order volumes rose at a solid pace in January, which many linked to a general improvement in demand. However, the pace of new work growth eased since December and was below the average for the past year. The increase in overall new orders occurred despite a modest fall in new export work for the second time in three months.
Input and output prices
Irish manufacturing firms raised their output charges for the 40th successive month in January. Prices charged rose at a robust pace as firms attempted to pass on higher input costs to customers. The rate of input price inflation accelerated in January and was the sharpest since September. There were reports of higher raw material costs, which some firms linked to shortages at suppliers.
Purchasing
Irish manufacturers recorded a solid expansion of their purchasing activity in January. Input buying has now increased in each month since September 2005 and firms widely linked the latest rise to efforts to support production in response to new work growth.
Despite a further rise in buying activity, stocks of purchases declined for the third month in a row and at the sharpest pace since August 2005.
Employment
January data signaled a modest increase in employee numbers at firms in the Irish manufacturing sector. Firms that recorded an increase in staffing levels commented on higher new order volumes. Employment has now risen in each month since April 2006.
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