Rate of job creation in manufacturing sector slows to 12-month low

The rate of job creation in the manufacturing sector slowed to a 12-month low for the third time in four months in February as firms reported difficulties in filling vacancies due to a lack of suitable candidates.

The latest PMI survey data from AIB shows overall growth in the sector slowed as output and employment rose at their softest rates for 11 and 12 months respectively.

However, new order growth showed more resilience, and backlogs increased at the third-strongest pace on record as supply and labour shortages constrained output.

Meanwhile, input and output price inflation accelerated to the third- and second-fastest rates on record.

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The PMI eased to 57.8 in February, from 59.4 in January, signalling the slowest overall improvement in manufacturing business conditions since March 2021. Any figure greater than 50 indicates improvement in the sector.

Trending lower

Aside from gains in October and in January, the PMI has trended lower since hitting a record high of 64.1 last May. That said, the latest figure remained well above the long-run survey average of 52.2 and marked a 17th successive month-on-month improvement.

The downward movement of 1.6 points in the headline figure was reflected in all five component sub-indices.

The biggest negative influence came from suppliers’ delivery times (-0.5), followed by stocks of purchases (-0.4), output (-0.3), employment (-0.2) and new orders (-0.2).

February survey data highlighted another strong increase in manufacturing production, extending the current sequence of expansion that started in March 2021.

Although the rate of growth remained faster than the long-run survey average, it was the weakest in nearly a year.

There was evidence of supply chain and workforce constraints, with reports of output held up by input shortages and high levels of staff absences due to Covid. That said, the 12-month outlook for output growth remained relatively strong.

New orders continued to rise sharply, with the rate of growth easing only marginally since January and outpacing production for the second successive month. Companies linked demand to less Covid restrictions, new customers and exports.

New export business rose at a rate little changed on January’s four-month high. With new work rising more quickly than output, backlog growth accelerated to the third-fastest rate since the series began in 2002.

Employment, another key metric of manufacturing performance, also showed weaker growth in February.

The rate of job creation slowed for the third time in four months to a 12-month low, although it remained above the long-run survey average. Some firms reported difficulty filling vacancies due to a lack of suitable candidates.

Survey data signalled an intensification of price pressures in February. Both input and output price inflation accelerated and were the third and second fastest on record, respectively.

Firms widely reported cost pressures driven by raw materials, electronic components, energy, transportation, packaging and UK customs.