Manufacturing activity expanded in July although the rate of growth declined slightly for the third consecutive month, the latest NCB purchasing managers' index said yesterday.
The composite index registered 55.0 in July, down from 55.1 in June and 55.7 in May. Readings above 50 indicate growth - contractions are indicated by readings below 50.
The monthly survey of 250 manufacturing firms also said average prices for inputs - for energy and raw materials generally - rose sharply in July. Yet the rate of inflation was lower than in June and May - the input price index stood at 62 last month, at 69.2 in June and 72.5 in May, the highest yet recorded.
"A combination of high oil prices, high import costs - due to weakness of the euro - and shortages of supplies again caused (input) prices to rise," said NCB.
While the rate of manufacturing growth was the lowest since February 1999, NCB pointed out that new orders picked up slightly after easing in June and May.
"Many manufacturers attributed the rise in orders to the general buoyancy in the Irish economy along with sustained orders from abroad," the stockbrokers said.
"All the signs in terms of domestic demand still seems to be strong," said NCB's chief economist, Mr Dermot O'Brien.
He added, however, that the growth rate of export orders slowed slightly. This partly reflected weaker demand from Britain due to sterling's strength and a tightening of monetary policy.
The stability of the euro, albeit at a weak rate, boosted export orders from other European states while contributing to a rise in input costs.
Mr O'Brien said there was no indication from the latest data that manufacturers were especially concerned about rising inflation.
While a general slowdown in economic growth would eventually be caused by a tightening supply of excess labour, this had yet to begin.
Employment in the manufacturing sector continued to grow, with the index reaching 54.0, less than the 54.8 recorded a month earlier.
"The scale of increase is going to get more difficult in the year ahead," Mr O'Brien said.
The report said: "Nearly 13 per cent of all manufacturers surveyed reported a rise in recruitment while only 4.6 reduced staffing levels . . .The rate of increase in employment nevertheless remained below levels seen towards the end of last year."
