Growth of the Irish manufacturing sector continued in August, although output, new orders and employment all rose at weaker rates than in the previous month. The rate of cost inflation eased to a six-month low and firms reduced their output prices for the third consecutive month.

 

We normally caution about exaggeration for example through the inclusion of overseas manufacturing in Irish data. The slowing evident here may not reflect much change in the real world.

Markit said that the seasonally adjusted Investec Purchasing Managers’ Index (PMI) – an indicator designed to provide a single - figure measure of the health of the manufacturing industry – signalled a further strengthening of business conditions during August. However, at 53.6, down from 56.7 in July, the index pointed to the weakest improvement in operating conditions since February 2014.

The rate of expansion in new orders slowed in August and was the weakest for a year-and-a-half. That said, the latest increase was still sharp amid some reports of new work in export markets. The rate of growth in new export business was substantial, despite easing slightly from July. A slower rise in manufacturing production was also recorded in August, with the solid expansion the weakest since February 2014.

Output has now increased in each of the past 27 months. Weaker growth of new orders led firms to work through outstanding business during the month. Backlogs decreased modestly, following a marginal accumulation in the previous month. A slower rise in new business was also linked by panellists to a rise in stocks of finished goods, which increased at the second-fastest pace in the series history during August.

Employment continued to rise, but as was the case with output and new orders, the rate of job creation eased over the month. Staffing levels increased at the weakest pace in just over a year. August data pointed to an easing of inflationary pressures, with the latest rise in input costs the weakest in the current six-month sequence of increasing prices.

Market, the London-based index firm, said taht there were reports that the weakness of the euro against sterling had led some imports to increase in price, but lower costs for items including food, plastics and steel were mentioned by those panellists seeing a drop in input costs. Easing cost inflation contributed to a third successive monthly fall in output prices, with competitive pressures also behind the latest reduction. The rate of growth in purchasing activity eased to an 18-month low in August, but remained solid.

Irish manufacturing PMIPanellists reported having made efforts to reduce stocks of purchases, with pre-production inventories decreasing modestly. Finally, suppliers’ delivery times continued to lengthen, albeit to the least extent in two years.

Irish manufacturing is dominated by American-owned firms led by Intel, the chip maker. The pic on top shows the Intel campus at Leixlip Co. Kildare where 2,800 Intel employees and about 1,200 contractors work.