Irish Economy
Irish manufacturing output rises but not matched by sales value
By Finfacts Team
Jul 1, 2014 - 6:42 AM

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The recovery in the Irish manufacturing sector continued at the end of the second quarter of the year as new business growth accelerated during June. Firms used inventories to help fulfil new orders and stocks of finished goods fell solidly as a result. Meanwhile, the rate of expansion in output eased, but remained marked. Cost inflationary pressures were muted again in June, while output prices were raised for the first time in six months.

Industrial production was up 12% in the 12 months to April 2014 according to the CSO while the turnover index was up 1.1%.

The turnover index remained below the 2011 level reflecting the plunge in values related to the drugs patent cliff 

The seasonally adjusted Investec purchasing managers' index (PMI) - - an indicator designed to provide a single-figure measure of the health of the manufacturing industry - - posted 55.3 in June, up slightly from 55.0 in May and signalling a thirteenth successive monthly improvement in operating conditions in the sector.

The rate of expansion in manufacturing new orders accelerated in June and was the strongest since February 2011. Panellists reported improving economic conditions and growth in export markets. The pace at which new business from abroad increased also quickened.

Despite this faster rise in new orders, production growth slowed. That said, the thirteenth successive monthly increase in production was still marked.

Firms used inventories to help meet order requirements in June. Consequently, stocks of finished goods decreased at a solid pace that was the fastest since August 2013.

Irish manufacturing firms recorded a further increase in employment in June, extending the current sequence of job creation to 13 months. The pace at which staffing levels rose eased from the previous month but was still solid.

Input prices continued to rise marginally. Some firms reported higher steel prices, but others reported that paper and milk costs had decreased. Manufacturers increased their output prices during June, ending a five-month period of falling charges. That said, the rate of inflation was only marginal amid competitive pressures.

Suppliers‟ delivery times lengthened solidly again in June, with panellists attributing delivery delays to low stock levels at vendors. Shortages of inputs also contributed to a modest rise in backlogs of work following a decline in the previous month.

Manufacturers increased their purchasing activity for the fifth month running in line with improving client demand. The rate of expansion was marked, and quicker than recorded in May.

Some panellists reported having raised their stocks of purchases, but others indicated that inputs had been used in the production process. As a result, pre-production inventories were unchanged overall.

Philip O'Sullivan, chief economist at Investec Ireland said:  "The latest Investec Manufacturing PMI Ireland report, covering June 2014, shows a thirteenth consecutive improvement in operating conditions, with the rate of growth picking up marginally from May (55.3 vs. 55.0).

"The solid rate of growth in June was driven by further strength in New Orders, which grew at the fastest rate since February 2011. The sharp increase in New Orders was attributed to improving economic conditions and higher demand from abroad, with the rate of growth in New Export Orders rising to the highest level in over three years. The UK and Asia were cited as key sources of growth in export business during the month.

"The increase in the rate of growth in New Orders did not translate into proportionally higher production growth (as measured by the Output index), however, as firms used existing inventories to fulfil new orders, causing the Stock of Finished Goods index to decline sharply (at the fastest pace since August 2013).

"Employment growth moderated from May‟s high (which was the fastest rate of growth recorded since December 1999) but remained robust."

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