Industrial sector output declines

The rate of contraction in the manufacturing sector quickened last month, with activity slowing faster than at any point since 1998, according to the latest NCB Purchasing Managers' Index (PMI).

NCB said the decline was driven mainly by weakness in new orders, which fell for the ninth successive month.

Firms surveyed for the research attributed most of the slowdown to export markets, with new export orders dropping for the 11th month in a row.

Poor international demand and competitiveness problems linked to the strong euro were blamed for the problem.

The decline in orders led in turn to continued falls in manufacturing output, which was scaled back for the sixth month in a row. The rate of decline was the fastest recorded since late 2001.

The overall index, which is designed to measure business conditions for manufacturing companies, fell to a historically low reading of 45.7, down from 47.5 in May. A reading below 50 is indicative of contraction.

NCB economist, Mr Eunan King, said the survey revealed a sector "under increasing pressure" and predicted that cutbacks would continue over coming months.

"The biggest problem is weakness of demand. Nobody is talking about investing," he said, pointing to a persistent pattern of weakness in PMI surveys conducted across Europe.

The Irish survey showed that manufacturing firms reduced their prices in June in an effort to offset fragile demand. The rate of deflation recorded for the month was the most substantial since 1998.

This was counteracted somewhat however by euro strength and lower oil prices which combined to reduce input costs for some companies.

Mr King said this was the only "offsetting factor" in an otherwise grim trend that can also been noted in releases from the Central Statistics Office (CSO).

Last Friday, the CSO said industrial employment had fallen to pre-boom levels, with jobs in the sector dropping by 14,200 in the year to March.

This negative employment drift continued in June, according to the NCB research, which pointed to a tenth consecutive month of staffing reductions.

The survey also showed a fall in levels of purchasing activity.