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Irish Economy Last Updated: July 01, 2015 - 6:22 AM


Irish manufacturing activity slows in June but remains volatile
By Michael Hennigan, Finfacts founder and editor
July 01, 2015 - 6:35 AM

 

The end of the second quarter of the year saw further sharp rises in output and new orders at Irish manufacturing firms, although there were signs of a slowdown in growth. Meanwhile, the rate of input cost inflation continued to accelerate, but firms lowered their output prices.

The official data from the CSO over the past year has shown a lot of volatility in industrial production because of the dominance of the US-owned chemical sector. 

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 54.6 in June, down from 57.1 in May but still signalling a marked monthly improvement in business conditions. The health of the sector has now strengthened in each of the past 25 months.

New orders at Irish manufacturing firms have now risen throughout the past two years. The latest expansion was sharp, but the weakest since February 2014. Panellists reported that new order growth mainly reflected improving economic conditions. New export orders also continued to rise, with the rate of growth slowing only slightly over the month.

Higher new orders led to another rise in manufacturing output, albeit the slowest for a year. Rising production requirements supported a further increase in employment in June, the twenty-fifth successive month in which job creation has been recorded. The latest rise was sharp, despite easing to the slowest since January. Increased operating capacity helped firms to work through backlogs of work for a second month running. Moreover, the rate of depletion was the fastest since September last year.

Input prices rose sharply in June, and at the sharpest pace in 21 months. The recent weakness of the euro against both sterling and the US dollar was a key factor leading input costs to rise, according to respondents. In spite of higher input prices, firms lowered their charges. The fall in output prices ended a two-month sequence of inflation. Raw material shortages were reportedly behind another lengthening of suppliers’ delivery times, with the solid deterioration broadly in line with that seen in the previous month. Firms continued to raise their purchasing activity in response to higher output requirements.

However, the rate of expansion slowed sharply from May according to Markit the compiler of the survey. This slowdown contributed to a fourth consecutive decline in stocks of purchases. Stocks of finished goods were unchanged in June, ending a six-month sequence of falling postproduction inventories. While some firms reported that slower new order growth had led stocks to rise, others signalled that the delivery of products to clients resulted in a fall in inventories.

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