Ireland’s manufacturing sector crept back into contraction territory in March for the first in three months, signalling a loss of growth momentum across the sector, according to AIB.
The headline AIB Ireland Manufacturing PMI is a composite single-figure indicator of manufacturing performance. Any figure greater than 50 indicates overall improvement of the sector. It was recorded at 49.7, down from 51.3 in February.
Intakes of new orders and manufacturing production both decreased on the month following some tentative signs of improvement in February and consequently, firms scaled back input purchasing further.
Spare capacity was evident within the sector, as indicated by the sharpest fall in backlogs since September 2011.
More positively, price and supply pressures eased. Vendor performance improved while the rate of input cost inflation dipped to the slowest in the current 33-month sequence of increase.
Playing a key role in the wider sector downturn was a renewed contraction in order book volumes in March. Survey members suggested that the reduction in new orders was largely a result of weak underlying demand trends.
Albeit only slight, the fall seemingly rippled to other areas of the goods-producing economy. One of the most pivotal consequences being a fresh decrease in factory production.
Following some tentative signs of improvement last month, the respective seasonally adjusted index dipped back below the neutral 50 threshold in March to signal a reduction in manufacturing output. The latest fall was only moderate but the fastest in the 2023 so far.
Little respite was offered in terms of foreign demand. In fact, new export orders contracted for the tenth month in a row with the latest reading signalling the sharpest fall over this period.
Relatively muted customer demand and a weaker sales performance led to a further cutback in input buying across Ireland’s goods-producing sector. The decrease was the seventh in as many months and moderate overall.
By contrast, March marked exactly two consecutive years of monthly expansions in pre-production inventories.
However, as a result of some efforts to realign stocks with weaker demand conditions, the latest increase was notably softer than the average for this sequence as a whole. Destocking also reportedly led to the first contraction in post-production inventories in nine months.
Elsewhere, the drop in intakes of new work meant that manufacturers were able to continue to focus more on processing outstanding work at the end of the first quarter of the year, as signalled by the sharpest depletion in backlogs of work since September 2011.
Despite current subdued demand conditions, Irish manufacturing firms remained strongly upbeat about their projections for output over the coming 12 months.
The degree of confidence remained broadly in line with February’s yearlong high amid hopes of a pick-up in market conditions, plans for product development and the anticipated commencement of new projects.
More positively, March saw some further alleviation in both supply and price pressures. Lead times shortened for the second time in the past three months and to the greatest extent since July 2013.
Concurrently, input costs and output charges continued to increase during March, but at slower rates. Average operating expenses rose at the softest pace in its current 33-month sequence of inflation while the upturn in selling prices was the weakest in 27 months.
Inflation continued to be reported across the board but mentions of moderations in raw material and energy prices have become increasingly widespread.
Finally, firms remained resilient in their recruitment efforts at the end of the first quarter of the year.
As has been the case over much of the past two-and-a-half years, manufacturers added to their staffing levels in March. That said, the rate of job creation eased and was only modest overall.
