Source: Markit Economics

Irish manufacturing output broadly unchanged in February and operating conditions continued to deteriorate in February, despite output being broadly unchanged over the month. Total new business decreased despite a sharp rise in new export orders.

The seasonally adjusted NCB Purchasing Managers’ Index (PMI) -- an indicator designed to provide a single figure measure of the health of the manufacturing industry - - rose slightly to 48.6 in February, from 48.1 in January, pointing to a modest deterioration of business conditions that was broadly similar to those seen over the previous four months. Output was broadly unchanged during February as falling new business was counterbalanced by some signs of strengthening demand, particularly in foreign markets.

Overall new business decreased at a steeper pace in February as confidence among clients remained depressed. This was despite a strong rise in new export orders during the month. New business from abroad grew at the fastest pace since May 2006 as manufacturers concentrated efforts on securing foreign business. As total new orders continued to decrease, Irish manufacturers transferred spare capacity to complete outstanding business. Consequently, backlogs of work declined sharply in February.

Employment fell again in February, extending the current sequence of job cuts to twenty-seven months. Although the pace of reduction eased over the month, it remained solid.

Input costs rose for the second month running as a range of raw materials including paper and plastics increased in price. However, intense competition meant that manufacturers were largely unable to pass on higher costs to clients, and in many cases led to reduced charges. Output prices decreased at the sharpest pace since last November, extending the current period of decline to fifteen months.

Insufficient stocks at suppliers led to a third consecutive lengthening of delivery times, and at a rate that was faster than the long-run series average.

Purchasing activity at Irish manufacturers decreased in February, as has been the case in each month for more than two years as new business volumes continued to fall.

Lower demand and a preference for cash flow were the key reasons behind a further reduction in pre-production inventories. Stocks of finished goods fell substantially in February, extending the current period of decline to twenty-two months. Lower post-production inventories reflected both attempts to streamline stocks and increased deliveries.

Commenting on the NCB Republic of Ireland Manufacturing PMI survey data, Brian Devine, economist at NCB Stockbrokers said: “The PMI continues to lurk just below the 50 mark with output at 49.9 just failing to break the hallowed mark. It is much the same story as in previous months; domestic demand and employment remain weak while new export orders continue to accelerate past the 50 mark reflecting the pick up in global activity.”

The NCB Republic of Ireland Manufacturing PMI (Purchasing Managers’ Index) is produced by Markit Economics. The report features original survey data collected from a representative panel of around 300 companies based in the Republic of Ireland manufacturing sector. The panel is stratified by Standard Industrial Classification (SIC) group, based on the industry contribution to GDP.