Business confidence levels in the manufacturing sector in Ireland remained positive in May but the outlook for employment in the sector dimmed, the latest confidence indicator suggests. Marc Coleman, Economics Editor, reports.
NCB's latest monthly Purchasing Manager's Index (PMI) of overall confidence registered a reading of 51.9 in May. The reading has now stayed above the 50 threshold - which indicates that firms surveyed expect activity to expand - for 45 successive months but it was down slightly on the 53.3 recorded in April.
A cooling in Ireland's property market and lower rates of construction mean economists are watching closely for signals that the slowdown is feeding through into the jobs market and the broader economy.
A component index measuring employment in the sector fell below the 50 mark, to 47.9 in May having risen above 50 to 50.7 in the previous month. This index now stands at its lowest level since July 2003.
"The latest survey shows continued growth in manufacturing activity ... It is of some concern, however, that the employment index indicates a decline in May. This is the second negative reading in three months and comes after almost a year of solid growth," NCB chief economist Dermot O'Brien said yesterday.
The fall in the Irish reading reflected the broader European trend. Euro zone manufacturing growth slipped unexpectedly to its weakest in 15 months, though the slowdown is seen as orderly and did not shift expectations of higher interest rates to come.
Still, the RBS/NTC Purchasing Manager's Index (PMI) survey showed output prices growing at their slowest pace in 14 months, which may ease some concerns that inflationary pressures are set to accelerate even as employment growth remains strong.
The PMI fell to 55.0 last month, its lowest since February 2006, from 55.4 in April, wrong-footing economists who had predicted a slight rise to 55.5 but still signalling above-trend economic growth.
Among the big four euro zone nations, Germany and Spain showed weaker growth while Italy and France picked up.
British manufacturing activity accelerated unexpectedly in May. The NTC PMI index rose to 54.9 last month from 54.1 in April. (Additional reporting, Reuters)
