The Irish manufacturing sector continued to improve in July as growth of output, new orders and employment all accelerated during the month. On the price front, a slower rise in input costs was recorded, while output prices decreased for the second month running.
Caution as usual is required on the level of activity which can include overseas contract manufacturing for tax avoidance purposes.
Markit said today that 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 56.7 in July from 54.6 in June to signal a further marked strengthening of business conditions, and one that was greater than in the previous month.
"The health of the sector has now improved in each of the past 26 months. Manufacturing output rose at a faster pace in July, with panellists reporting having worked on both existing business and an increased amount of new work during the month. Production has increased continuously since June 2013, with growth in consumer goods output the fastest of the three market groups covered by the survey."
It said that the rate of expansion in new orders also picked up from June amid improving client demand and successful advertising campaigns. Meanwhile, the weakness of the euro continued to underpin growth of new export business. Rises in both current and future output requirements led to another strong rise in employment. "Despite increased operating capacity, outstanding business rose for the first time in three months, reflecting the pace of new order growth. Firms also reacted to greater production requirements by raising their purchasing activity at a sharp and accelerated rate."
Consequently, stocks of purchases were depleted at a fractional pace that was the weakest in the current five-month sequence of decline. Meanwhile, stocks of finished goods increased for the first time in nine months amid efforts to build inventories and the slower delivery of products to customers. Although input prices continued to increase in July, the rate of cost inflation eased to the slowest in the current five-month period of rising input prices. The weakness of the euro was the main driver of cost inflation, while falling prices for some raw materials reportedly led to reduced cost pressures. Competition and falling prices in world dairy markets contributed to the latest reduction in output prices, the second in as many months. The rate of decline was modest, but faster than seen in June.
Due to the dominance of US-owned firms, a fall in the euro/dollar rate increases manufacturing costs in Ireland as they are reported in US dollars.