Irish Economy 2014: Growth in the
Irish manufacturing sector gained momentum in April with both output and new
orders rising at faster rates during the month. Firms responded by increasing
purchasing at a sharper pace and continuing to take on extra staff. Meanwhile,
input price inflation continued to slow and the rate of decline in output prices
quickened.
US firms
dominate Irish manufacturing and drugs account for about half of output.
However, the monthly PMI (purchasing managers' index) surveys do not capture
dips in output in response to patent expirations -- known as the "patent cliff."
The seasonally adjusted Investec PMI – an
indicator designed to provide a single-figure measure of the health of the
manufacturing industry – rose for the third successive month in April, posting
56.1 up from 55.5 in the previous month. The latest improvement in business
conditions in the sector was sharp, and the strongest since February 2011.
The rate of growth in production at Irish
manufacturing firms quickened to the fastest in 38 months as an expansion was
recorded for the eleventh month running.
Anecdotal evidence highlighted the positive
impact of export demand on output. New export orders increased for the tenth
successive month and at a broadly similar pace to that seen in March. The rate
of growth in overall new business quickened for the third month in a row and was
the fastest since March 2011. Some panellists reported higher new orders from
the UK.
Higher new order levels led to an increase in
backlogs of work, the first in seven months. Firms also made efforts to build
stocks of finished goods, the level of which rose for the second month running.
Meanwhile, stocks of purchases increased at a
solid pace, with panellists raising inventories in order to cater for higher
client demand. The accumulation of pre-production stocks was helped by a third
successive monthly expansion in purchasing activity. Moreover, input buying rose
to the greatest extent since February 2011.
Higher workloads led manufacturers to take on
extra staff for the eleventh successive month, with the rate of job creation
remaining solid.
Philip O‟Sullivan,
chief economist at Investec Ireland said: "The latest Investec
Manufacturing PMI Ireland report shows an acceleration in activity during April,
with the headline index increasing to 56.1 – its highest level since February
2011.
"The improvement in the headline index was
primarily driven by a strong expansion in output and the third successive
quickening in the rate of growth in New Orders (which stood at a 37 month high
in April). Interestingly, for the first time in the current sequence of growth,
panellists cited signs of improvement in the construction sector as a
contributory factor to higher New Orders. The other key driver of growth in New
Orders was further strength in New Export Orders, which have now expanded for
ten successive months. Anecdotal evidence suggested that the UK was a key source
of new export business during the month."
