Manufacturing sector strengthens in July

The State's manufacturing sector continued to grow in July with employment up, order books continuing to strengthen and purchasing…

The State's manufacturing sector continued to grow in July with employment up, order books continuing to strengthen and purchasing managers identifying a slight improvement in general business conditions, according to NCB Stockbrokers Purchasing Managers' Index (PMI).

The PMI shows both domestic and foreign demand for Irish manufactured goods grew for the seventh month in a row, albeit at a slightly slower pace than the near two-year highs in June. Overall, the seasonally adjusted index for July was 53.6. An index of 50 means no change in condition but the greater the climb over 50, the more the sector is growing. The June index was 54.5 but NCB's senior economist Mr Eunan King said July's modest easing was not significant, describing the figures as encouraging.

"Though the latest PMI shows a small cooling in the rate of manufacturing activity growth, primarily on slower growth in export orders, the recovery in the sector continues, with producers building inventories and employment remaining on a rising trend," he said. Robust growth of order books continued to drive further expansion in July, Mr King added.

"Panel firms generally linked increased success tendering for new contracts to a further slight improvement in business conditions. Meanwhile, foreign demand for Irish manufactured goods also rose for the seventh consecutive month running. Strengthening demand spurred a further significant increase in manufacturing output in July," he said.

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The rate of expansion of output fell back compared to the previous two months, however, as a number of panel firms adjusted production schedules in line with weaker growth of order books (compared to high June levels), he added.

The seasonally adjusted stocks of purchases index rose to 51.6 from 49.2 in June, the first sign of an inventory build-up since March 2001. NCB noted just under 17 per cent of all firms surveyed reported that they had added to their existing stocks in the month in anticipation of strengthening demand and to guard against further raw material price increases.

In employment, the number of manufacturing jobs rose modestly for the third consecutive month. Just under 12 per cent of firms recruited staff to boost capacity in line with higher levels of output and expected increases in activity. However, the employment index of 51.7 in July was slightly lower than July's 52.2.

On the downside, input costs rose for the fourth month in a row and the rate of inflation was the highest since October 2000. Firms said input costs had been driven higher due to increased paper, packaging and steel prices.

The manufacturing sector in the euro zone grew for the sixth month in a row in July as companies won more new business, according to the Reuters Euro-zone Purchasing Managers' Index. The survey of 2,500 firms showed manufacturers in Germany, the euro-zone's biggest economy, reported better business in July for the second month running. Growth also picked up in July in France, Italy and Austria. However, the rate of growth slowed in Greece, the Netherlands and Spain.

Conor Lally

Conor Lally

Conor Lally is Security and Crime Editor of The Irish Times