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News : Irish Economy Last Updated: Feb 2, 2011 - 4:28 AM

Irish manufacturing posted sharpest rise in output in January since April 2000
By Finfacts Team
Feb 1, 2011 - 7:05 AM

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Source: Markit

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 strengthening demand.

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 months.

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.

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