Irish manufacturing output slowed in October - Data not reliable
A further solid improvement in business conditions in the Irish manufacturing sector was recorded in October according to a monthly survey. However, the data are not reliable as official figures show a 30% surge in production in the 12 months to June — a jump of almost a third in activity suggests the booking of overseas production in Ireland for tax purposes, which is termed "contract manufacturing."
Production growth continued to ease according to the purchasing mangers' index (PMI) survey , but there was a faster expansion in new business. On the price front, a second successive reduction in input costs was registered, prompting a further fall in output prices.
The seasonally adjusted Investec PMI — an indicator designed to provide a single-figure measure of the health of the manufacturing industry — posted 53.6 in October, down fractionally from 53.8 in September and signalling a solid improvement in the health of the manufacturing sector. Business conditions have now strengthened in each of the past 29 months.
Markit, the compiler of the survey, says the rate of expansion in manufacturing production continued to ease in October, the third successive month in which a slowdown has been recorded. The latest rise was the weakest since February 2014, but higher sales, in a number of cases from export markets, supported continued output growth. A slower increase in output contrasted with a sharp and accelerated expansion in new orders, as some panellists reported having secured new clients.
New export orders also rose at a substantial pace amid reports of higher new business from clients in the UK and US. Backlogs of work decreased for the third month running, albeit at a marginal pace that was the slowest in this sequence. Falling outstanding work was linked by panellists to the completion of projects, and this was also a factor behind a first decrease in stocks of finished goods since May.
Meanwhile, firms continued to raise their staffing levels in response to higher output requirements. The rate of job creation was solid, but eased to the slowest since December 2013. October saw a second successive monthly fall in input costs at Irish manufacturing firms, with energy and raw materials such as metals reportedly down in price over the month.
"Decreasing input costs led companies to lower their output prices accordingly, resulting in a fifth consecutive decline. That said, the reduction was the weakest since June. Purchasing activity rose only slightly during the month, with the latest increase the slowest in the current 21-month sequence of expansion. This relatively weak growth of input buying resulted in a fall in stocks of purchases, following a rise in the previous month. Moreover, the rate of depletion was the fastest since February 2014. Finally, reports of raw material shortages contributed to another lengthening of suppliers’ delivery times, and the most marked in three months."