Higher new orders from both domestic and export markets contributed to a further improvement in Irish manufacturing PMI in May according to survey data published Tuesday. However, official data as reported by the CSO last month showed that production had risen 45% in the year to March, boosted by booking by US-owned pharmaceutical firms of overseas production in Ireland for tax purposes — so manufacturing data has to be treated with caution while recognising a genuine rise by indigenous firms in what is termed the 'Traditional' industrial production sector. Checkout information on data and distortions here:
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An annual industrial production rise of 45% in the real world implies the availability of underutilised facilities; a huge jump in new capacity coming on stream or fairytale economics.
Markit, the London financial and economics index firm, says that based on its May survey that both Irish output and employment were increased at sharper rates than in April. Meanwhile, manufacturers raised their output prices for the second successive month on the back of further cost inflation — as Irish manufacturing is dominated by units of US firms, inputs are mainly prices in dollars and the fall in the value of the euro has pushed up prices in euro terms.
The seasonally adjusted Investec Purchasing Managers’ Index (PMI ) – an indicator designed to provide a single-figure measure of the health of the manufacturing industry – rose to 57.1 in May from 55.8 in April to signal a substantial strengthening of business conditions during the month.
The reading was the highest in three months, with operating conditions now having improved throughout the past two years. The rate of growth in new business quickened in May and was the fastest in three months. Some panellists reported having secured new clients, while others highlighted the impact of new product launches.
Markit says new export orders also rose sharply, with euro weakness mentioned by some of those panellists recording an increase. Higher new orders led to a further expansion of manufacturing output, thereby extending the current sequence of growth to two years. Moreover, the rate of increase was the sharpest since last August. Despite the strong rise in new work, outstanding business decreased marginally amid reports of increased capacity. This was helped by a further substantial rise in employment, with the rate of job creation ticking up slightly in May.
Manufacturers also upped their purchasing activity at a considerable pace in response to greater output requirements. Moreover, the rate of expansion was the fastest since February 2011. This increase in demand for inputs, and stock shortages at suppliers, led to a deterioration in vendor performance. Lead times lengthened for the twenty-second month in a row.
Input prices rose for the third month running in May, with the recent weakness of the euro against sterling and the US dollar the principal factor driving up costs. That said, the rate of inflation eased from that seen in April. Higher input costs led manufacturers to raise their charges for the second successive month, albeit only marginally.
Manufacturers continued to lower their stocks of purchases in May, extending the current sequence of depletion to three months. Panellists reported that inventories had been used in the production process. Meanwhile, the use of stocks of finished goods to help meet sales led to a marginal reduction in post-production inventories.