The Irish manufacturing PMI remained strong in April but this survey data is polluted by booking of overseas manufacturing in Ireland for tax avoidance purposes.
Official data showed last month that on an annual basis production for February 2015 increased by 31.8% when compared with February 2014 — manufacturing output could jump by almost a third in a year!
Although new work increased at a slightly weaker pace, the rate of production growth picked up according to the Markit PMI survey. The weakness of the euro continued to impart inflationary pressure on firms’ costs, but this was mitigated to some extent by a first increase in output prices in 2015 so far.
The seasonally adjusted Investec Purchasing Managers’ Index (PMI ) — an indicator designed to provide a single-figure measure of the health of the manufacturing industry — registered at 55.8 in April, thereby signalling a further sharp monthly improvement in business conditions.
However, the reading was down from 56.8 in the previous month and pointed to the weakest strengthening of operating conditions in three months. The rate of expansion in manufacturing output quickened in April and was substantial. Where production increased, this was linked to strengthening client demand, with some firms specifying increased new export orders. Data signalled growth of both total new work and new export business, although in both cases the rates of expansion were slower than seen in March.
Markit says new product launches and the weakness of the euro reportedly helped firms to secure new work. Where new export orders increased, the UK was again mentioned as a source of new business. Rising output requirements led to another sharp rise in employment at Irish manufacturing firms. This rise in operating capacity was not sufficient to prevent a third successive monthly accumulation of backlogs of work, although the latest increase was only fractional. Input price inflation was recorded for the second month running, again linked to the weakness of the euro against both sterling and the US dollar.
"Moreover, the rise in costs during April was the sharpest since September 2013. In response to higher cost burdens, firms increased their output prices, the first time in 2015 so far that inflation of charges has been recorded. A further marked increase in purchasing activity was recorded in April, with the rate of growth little changed from the previous month. This added capacity pressure to suppliers, resulting in another lengthening of lead times. Modest declines in both stocks of purchases and finished goods were recorded in April. Preproduction inventories fell as inputs were used to support growth of output, while the use of finished goods to help fulfill order requirements led to a decrease in post-production inventories. "
The Irish manufacturing sector is dominated by US-owned firms and a higher dollar versus the euro hikes import costs.