The recovery in the Irish manufacturing sector
continued at the end of the second quarter of the year as new business growth
accelerated during June. Firms used inventories to help fulfil new orders and
stocks of finished goods fell solidly as a result. Meanwhile, the rate of
expansion in output eased, but remained marked. Cost inflationary pressures were
muted again in June, while output prices were raised for the first time in six
Industrial production was up
12% in the 12 months to April 2014 according to the CSO while the turnover index
was up 1.1%.
The turnover index remained below the 2011 level
reflecting the plunge in values related to the drugs patent cliff
The seasonally adjusted Investec purchasing
managers' index (PMI) - - an indicator designed to provide a single-figure
measure of the health of the manufacturing industry - - posted 55.3 in June, up
slightly from 55.0 in May and signalling a thirteenth successive monthly
improvement in operating conditions in the sector.
The rate of expansion in manufacturing new orders
accelerated in June and was the strongest since February 2011. Panellists
reported improving economic conditions and growth in export markets. The pace at
which new business from abroad increased also quickened.
Despite this faster rise in new orders, production growth
slowed. That said, the thirteenth successive monthly increase in production was
Firms used inventories to help meet order requirements in
June. Consequently, stocks of finished goods decreased at a solid pace that was
the fastest since August 2013.
Irish manufacturing firms recorded a further increase in
employment in June, extending the current sequence of job creation to 13 months.
The pace at which staffing levels rose eased from the previous month but was
Input prices continued to rise marginally. Some firms
reported higher steel prices, but others reported that paper and milk costs had
decreased. Manufacturers increased their output prices during June, ending a
five-month period of falling charges. That said, the rate of inflation was only
marginal amid competitive pressures.
Suppliers‟ delivery times lengthened solidly again in
June, with panellists attributing delivery delays to low stock levels at
vendors. Shortages of inputs also contributed to a modest rise in backlogs of
work following a decline in the previous month.
Manufacturers increased their purchasing activity for the
fifth month running in line with improving client demand. The rate of expansion
was marked, and quicker than recorded in May.
Some panellists reported having raised their stocks of
purchases, but others indicated that inputs had been used in the production
process. As a result, pre-production inventories were unchanged overall.
Philip O'Sullivan, chief
economist at Investec Ireland said: "The latest Investec
Manufacturing PMI Ireland report, covering June 2014, shows a thirteenth
consecutive improvement in operating conditions, with the rate of growth picking
up marginally from May (55.3 vs. 55.0).
"The solid rate of growth in June was driven by further
strength in New Orders, which grew at the fastest rate since February 2011. The
sharp increase in New Orders was attributed to improving economic conditions and
higher demand from abroad, with the rate of growth in New Export Orders rising
to the highest level in over three years. The UK and Asia were cited as key
sources of growth in export business during the month.
"The increase in the rate of growth in New Orders did not
translate into proportionally higher production growth (as measured by the
Output index), however, as firms used existing inventories to fulfil new orders,
causing the Stock of Finished Goods index to decline sharply (at the fastest
pace since August 2013).
"Employment growth moderated from May‟s high (which was
the fastest rate of growth recorded since December 1999) but remained robust."