Weak new business orders forced manufacturing companies to scale back their operations for the 10th consecutive month in July, according to the latest NCB Purchasing Managers' Index, writes Una McCaffrey.
The research, published yesterday, shows that manufacturing firms suffered their worst decline in new business for almost two years last month.
NCB said the results were "indicative of marked deterioration" within the sector.
Companies reported a drop in orders from both domestic and international clients, with new export business shrinking for the 12th month in a row as the euro's strength made Irish goods more expensive abroad.
NCB senior economist, Mr Eunan King, said the survey offered "some slight grounds for optimism" however, pointing to a slowing in the rate of contraction in new export orders.
He also highlighted a "less rapid deterioration" in manufacturing employment which, despite continuing to slip in July, posted a less dramatic fall than in recent months.
The overall index recorded a value of 45.8 last month, up from June's survey low of 45.7. A reading below 50 in the index signals contraction.
Mr King took the relative improvement as an indication that declines in the sector could be stabilising.
Similarly tentative signs of hope were in evidence in the Reuters Euro-zone Purchasing Managers' Index yesterday, which showed that contraction in the manufacturing sector moderated in July, notably in Germany, the region's dominant economy, where new business bounced back into growth.
Germany's sluggish economy has been a major drag on the region and better demand there helped boost the euro-zone index to 48 in July from 46.6 in June.
Analysts said there are signs that the sector could return to growth as early as September.
Britain's manufacturing sector meanwhile bounded into growth in July for the first time in nine months, defying expectations of a fall.
US manufacturing also broke a declining trend, thus boosting hopes the economy could be headed for a full-fledged recovery.
The US Institute for Supply Management said its manufacturing index had pushed up to 51.8 in July.
Firms surveyed for the Irish index said they had cut their output for the seventh month in a row in July as poor volumes of new business hit the bottom line.
Stocks of raw materials were reduced for the same reason, while post-production stocks fell back at the sharpest rate since the survey was initiated five years ago. - (Additional reporting, Reuters)
