Source: Markit Economics

Irish manufacturing data for February 2009, signalled a marked acceleration in the deterioration of operating conditions in the sector. Series record falls in output and employment were posted, while new orders also declined sharply.

At 33.2, the seasonally adjusted NCB Purchasing Managers’ Index(PMI) – an indicator designed to provide a single figure measure of the health of the manufacturing industry – pointed to a considerable deterioration in operating conditions. Moreover, the pace of decline was the steepest since data were first collected in May 1998.

Output contracted at a survey record rate in February, largely due to a reduction in new business. Production has now fallen in each of the past twelve months.

The ongoing economic downturn led to a further decline in new orders. The latest contraction was the second-steepest in the series history, as clients continued to postpone purchasing decisions given the fragile economic climate. New business from overseas also fell sharply during the month.

Respondents suggested that new orders from Central and Eastern Europe had seen a particularly marked contraction.

Backlogs of work continued to fall. Around 45% of respondents signalled less work-in-hand, compared with less than one-in-ten that saw an increase.

Job shedding intensified in February as employment declined at the fastest pace in the survey’s history. The principal cause of the latest round of redundancies was lower output requirements.

Input prices fell substantially due to a combination of the relative strength of the euro against sterling, pressure on suppliers to reduce prices and a drop in the global price of oil. Output charge deflation accelerated to a series record as manufacturers used discounting to try and stimulate demand and respond to greater competition.

Average vendor performance improved for the ninth successive month. Moreover, the latest reduction in lead-times was the fastest in the history of the survey.

Purchasing activity declined at a series record pace. Around 53% of respondents noted lower input buying, against just over 9% that posted a rise. Firms continued to streamline their stocks of purchases in response to lower output requirements. As a result, pre-production inventories fell at the steepest pace in the series history. Despite easing slightly, the latest reduction in post-production inventories remained considerable. Exactly one-third of panellists indicated lower stocks, against over 17% that signalled a rise.

Commenting on the NCB Republic of Ireland Services PMI survey data, Brian Devine, economist at NCB Stockbrokers said: “The global collapse in trade is evident in the February PMI figures with the export order component falling 8 points to post a new record low. The outlook for Irish exporters was always going to be challenging in 2009 as the UK, US and euro zone all pared back their imports but the recent woes in Eastern European economies has added to the contraction in Irish export orders.