Source: Markit

Irish manufacturing growth eased further in August while operating conditions continued to strengthen during the month, the rate of improvement eased further. This was despite faster new business growth in August. Output increased, but at a weaker pace, while the rate of job cuts accelerated.

The seasonally adjusted NCB Purchasing Managers’ Index (PMI) - -  an indicator designed to provide a single figure measure of the health of the manufacturing industry  - - fell for the third month running to 51.1 in August, from 51.4 in July, to register only a slight improvement in business conditions in the sector. However, operating conditions have now strengthened in each of the past six months.

The rate of production growth eased again in August, and was only marginal, partly reflecting recent weak new order expansions. However, latest data pointed to a sharper increase in new business that was faster than the long-run series average.

A number of respondents mentioned higher new export orders as boosting overall new business. New orders from abroad rose markedly, and at a faster pace than seen in July.

Despite continued new order growth, Irish manufacturers depleted outstanding business further in August as part of attempts to reduce inventory levels.

Employment also continued to fall in August, extending the current period of job shedding to three months as leavers were not replaced and firms attempted to limit costs. Staffing levels decreased at a solid pace that was the fastest since March.

Latest data pointed to a further steep increase in input costs at Irish manufacturers as a number of raw materials were reported to have risen in price, particularly metals, paper and plastics. Although some firms were able to raise output prices in response, intense competition meant that the increase was only marginal.

Average vendor performance deteriorated to the greatest extent in the series history in August, as had been the case in the previous month. The substantial lengthening of lead times reflected both commodity shortages, and insufficient capacity at suppliers.

Purchasing activity continued to rise, although the latest increase was only slight, and the weakest in the current sequence of growth. Despite higher input buying, stocks of purchases decreased for the thirty-third consecutive month. Moreover, the rate of depletion was the strongest since November 2009.

Stocks of finished goods also fell sharply as deliveries increased. The twenty-eighth consecutive monthly reduction in post-production inventories was the fastest since May 2009.

Commenting on the NCB Republic of Ireland Manufacturing PMI survey data, Brian Devine, economist at NCB Stockbrokers said: "The output component of the PMI signalled expansion for the sixth month running, albeit at a weaker rate than in July. New orders, which had slowed for the prior two months expanded at an accelerated rate on the back of a continued marked performance of new export orders. Panellists indicated that higher new export orders largely reflected strengthening global demand and rather surprisingly the US was mentioned in particular. As one of the most highly leveraged economies to global growth in the world, particularly given the prospects for domestic demand, it is promising that Irish manufacturers continue to attract new orders from abroad as this will be key in driving the initial stages of the recovery."

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.