Irish manufacturing activity contracted at its sharpest rate in two years last month as new export orders fell for the first time in a year, according to the latest NCB Purchasing Managers' Index.
Corresponding surveys in other euro area countries such as Germany and France showed similar slowdowns in manufacturing, prompting renewed fears for global growth.
However, in Britain, Ireland’s largest trading partner, headline PMI grew unexpectedly for the first time in three months in September on the back of a bounce in output.
Ireland’s manufacturing PMI fell to 47.3 in September from 49.7 in August. Anything below 50 constitutes a contraction.
The index, a composite measure of 11 sub-indices, indicated a reduction in new export orders, ending an 11-month sequence of expansion.
However, the rate of decline was only marginally below 50, with respondents linking the fall-off to “weakening global demand”.
The September data indicated new orders at Irish manufacturers fell for a fourth consecutive month. The rate of contraction, however, was “marked”, accelerating to the sharpest rate recorded since August 2009.
There was also a steep fall-off in overall manufacturing output following an increase the previous month which was linked to a decline in new orders.
The employment sub-index, which registered a surprise growth in August, also recorded a sharp decline, the fourth in the past five months and the sharpest since September last year.
Anecdotal evidence suggested that staffing levels had been reduced in line with lower workloads, the survey said.
The input prices sub-index, which has been driven up by higher oil and raw material prices all year, continued to increase in September. However, the rate of inflation eased with some reports that firms had been able to negotiate discounts with suppliers.
"The health of the Irish manufacturing sector deteriorated further in September as output contracted and new business fell at a faster pace," the Dublin-based brokerage said.
NCB chief economist Brian Devine said the figures highlighted the slowdown in the global economy over the last couple of months.
“We had already pencilled in a slowdown in our Irish 2011 GDP and expect it to contract marginally, unlike the consensus who expect expansion. We still, however, expect Ireland to hit its EU/IMF deficit targets despite this slower growth,” he said.