The Irish manufacturing sector stabilised in July, with data hinting at “early signs of recovery” in demand, according to a purchasing managers’ index (PMI) published by AIB.
The “marginal” improvement in conditions ended four months of deterioration for manufacturing, although the PMI also signalled a jump in cost burdens for businesses, with input prices rising at the sharpest rate for 17 months.
AIB suggested that these would need to be “monitored closely” to assess inflationary concerns.
The headline index rose to 50.1 in July, up from 47.4 in June.
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“The marginal improvement in the health of the Irish manufacturing sector was driven by a renewed rise in output and accelerating jobs growth, while the contraction in new orders eased on the month,” said AIB chief economist David McNamara.
The Irish manufacturing PMI remains above the flash July readings for the euro zone and United States at 45.6 and 49.5 respectively, but below the UK at 51.8, he noted.
“Output rose marginally in July following four months of contraction, albeit respondents reported continued weak client demand. This was reflected in a further fall in new orders, albeit the rate of contraction eased compared to June,” he said.
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Manufacturing companies linked this drop to the current economic climate, which has affected domestic and foreign demand.
“This was also reflected in new export orders, with the respective seasonally adjusted index coming below 50 for the sixth successive month. Demand from the US, UK and Germany were cited as key sources of weak demand. Stocks of both inputs and finished goods fell again due to the declining levels of new orders and at an accelerated pace in July.”
Hiring picked up in July, while Irish manufacturers maintained a positive outlook about activity over the coming 12 months, with sentiment improving compared to June, said AIB.
But price pressures “remained a concerning feature” of the survey in July, with input price inflation accelerating to a 17-month high, reflecting higher raw material and transport costs.
“Output price inflation also rose, as firms attempted to pass on higher input costs, but the rate of inflation eased on the month,” said Mr McNamara.
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