Irish manufacturing activity contracted in September, reversing three months of growth as output, employment and exports shrank, “mirroring” a slowdown across Europe and the rest of the world, AIB said on Tuesday.
Activity in the sector has now fallen in six of the past nine months, according to the bank’s latest manufacturing purchasing managers’ index (PMI), based on a survey of about 250 companies.
The September headline index dropped below the neutral 50 threshold – which separates growth in activity from contraction – to 49.4 from 50.4 in August, indicating a decline in activity. The drop-off followed three consecutive months of marginal growth during the summer period.
AIB said total manufacturing work shrank in the month but the overall rate of contraction eased compared with August.
However, new work from abroad fell at a “solid pace”, the bank said, “that accelerated to the fastest since April”, as survey respondents reported lower demand from European clients and delayed decision-making on big projects.
“The deterioration in the Irish manufacturing sector was driven by a fall in output, new orders and employment, mirroring a broad-based slowdown in the sector in Europe,” said AIB chief economist David McNamara. However, the PMI reading for the Republic remains higher than the flash September readings for the euro zone and the US, he said, but below the latest UK index.
S&P Global’s preliminary composite PMI for the euro area published last week revealed an unexpected downturn in business activity levels across the single currency area, as a recent slump in manufacturing accelerating in the month.
Business optimism waned, suggesting purchasing managers do not expect an imminent turnaround, while the factory future output index sank to an 11-month low of 52.0 from 57.5.
Meanwhile, AIB’s latest PMI also points to an acceleration of price pressures on Irish manufacturers in September, mostly due to rising raw materials and input costs. “This ushered in the strongest rate of factory gate price inflation since February 2023,” AIB said.
“The input price index remained close to recent peaks, reflecting higher raw material costs,” Mr McNamara said. “Output price inflation also rose, as firms continued to pass on higher input costs to customers, despite the soft demand environment.”
Despite the reduction in activity, however, manufacturers in the Republic remain broadly positive about the next 12 months, with business sentiment rising in September. Survey respondents remain optimistic that market conditions will improve in the next year, Mr McNamara said.
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