Bottlenecks slow Irish manufacturing momentum as demand soars

Demand for Irish-made goods continued soaring last month, but bottlenecks and rising costs slowed momentum, the latest figures show.

AIB’s manufacturing purchasing managers’ index (PMI) hit 62.8 in August, less than the record 63.3 it reached the previous month, but still the fourth highest ever.

The PMI takes 50 as its benchmark. Any reading above that figure means that manufacturing expanded on the previous month, while any result below that shows that it shrank.

August was the fifth month in a row that the index broke the 60 mark, according to AIB's chief economist, Oliver Mangan, who said the Republic's figures were in line with those of key advanced economies.

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Underlying demand for Irish-made goods continued to improve "markedly" in August, AIB commented.

New orders continued to rise rapidly from a record peak in July, with last month’s expansion the sixth highest ever, despite being the slowest since April.

"New export orders increased at the second-fastest rate since November 2017, with the UK, continental Europe, United States and Asia all reported as sources of growth," said the bank.

Supply backlogs

Output failed to match demand, as manufacturers’ backlogs rose for the sixth consecutive month in August.

Businesses blamed higher backlogs on increased demand, hold-ups in supplies and staff shortages.

Delays in supply times lengthened “severely” according to the bank, recording their third worst result in the history of the index.

Widespread raw material shortages and rising transport charges drove manufacturers’ costs up. Input prices – what companies pay to make their goods – remained high, but was down from record levels earlier in the year.

Manufacturers passed on the increased costs to customers, as output prices – what they charge for their goods – also rose sharply.

Despite the squeeze on raw materials, labour and transport, businesses were upbeat about their prospects for the subsequent 12 months in August.

The future growth index remained “firmly” above the non-change 50 mark, signalling strong optimism for growth, said AIB.

“Firms expected strong sales to Europe and UK markets as economies continued to recover from the pandemic, and also increased business due to Brexit.”

Mr Mangan said the index indicated another strong month for manufacturing.

“The sub-components of the Irish PMI survey showed that while the rates of

growth slowed since July, they remained among the strongest ever registered,” the economist added.

“Meanwhile, the 12-month outlook for production remained upbeat, but it was

not as high as the level recorded in July.”