The Irish manufacturing sector took another
big step towards recovery in January as growth of both production and new orders
surged. Employment rose for the second month running, while purchasing increased
at the fastest pace since 2000. However, input price inflation accelerated to
the strongest in twenty-nine months.
The seasonally adjusted NCB Purchasing Managers’ Index (PMI) – an indicator designed to provide a single
figure measure of the health of the manufacturing industry – jumped to 55.8 in
January, from 52.2 in December. This signalled a marked improvement in operating
conditions in the sector, and the strongest since April 2000.
Irish manufacturing production increased
substantially in January, with the rate of expansion the fastest in almost
eleven years. The rise reflected a sharp increase in new orders, but was also
partly influenced by an end to the severe weather conditions seen in December.
New business also rose at a much sharper pace
as weather conditions improved and demand strengthened. New export orders rose
at a considerable pace that was the third-fastest in the series history.
Higher new business was the main factor
behind a series record accumulation of backlogs of work in the sector. This was
only the third time in the history of the series that a monthly rise in
work-in-hand had been registered.
Employment increased for the second month
running in January. Although the rate of job creation was only slight, it was
faster than that seen in December.
Input cost inflation accelerated to a
twenty-nine month high as oil, as well as a number of raw materials, increased
in price. Consequently, Irish manufacturers raised their output prices leading
to the fastest rate of charge inflation since September 2008.
The survey shows that despite steep
inflation, the rate of purchasing activity surged in January, and was the
fastest in eleven years. Manufacturers raised their input buying in line with
Stocks of purchases continued to decrease as
inputs were consumed in the production process. Post-production inventories also
fell, with stocks used to partly fulfill new orders. However, the rate of
depletion was only fractional, and the weakest since May 2008.
Stock shortages at suppliers was the main
reason for the latest deterioration in vendor delivery times, which lengthened
markedly in January. However, the pace of deterioration was the slowest in ten
Commenting on the PMI survey data, Brian
Devine, economist at NCB Stockbrokers said: "The Irish manufacturing
sector continues to grow on the back of export driven demand as both production
and new orders surged in January. Employment rose for the second month running,
while purchasing increased at the fastest pace in eleven years. Unfortunately
industrial employment in Ireland constitutes just 13% of total employment and we
expect total employment to contract once again in 2011 on the back of weak
domestic demand. The large dichotomy between the exporting sector and the
domestic part of the economy which has been evident since the recession started
continues to play out. We are looking for exports to grow by nearly 5% in 2010
but for domestic demand to contract by 2.6%."
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.