Business

Confidence in Irish manufacturing sector drops amid renewed downturn

Persistent fragility across sector last month as subdued demand in domestic and export markets created headwinds

High-tech manufacturing in the pharma and tech sectors has been central to Ireland's recent economic success. Photograph: Getty Images

Colin Gleeson
Tue Apr 2 2024 - 01:00

There was persistent fragility across the manufacturing sector last month as headwinds from subdued demand in both domestic and export markets drove optimism in the industry to its lowest level since 2020, new data shows.

Figures for March from the AIB Ireland Manufacturing PMI shows both output and new orders returned to contraction. Growth expectations for the year ahead also weakened considerably.

On a more positive note, manufacturers maintained a moderate rate of job creation and supplier performance improved to the greatest extent for nine months.

At 49.6 in March, the seasonally adjusted AIB Ireland Manufacturing PMI was down from 52.2 in February. Worsening manufacturing conditions have now been recorded in three of the past four months, although the latest downturn was only marginal.

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The headline PMI figure is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. A figure below 50 indicates contraction.

The March figures pointed to renewed declines in both production volumes and incoming new work. AIB said survey respondents often commented on cutbacks to production schedules in response to lacklustre demand conditions and weaker-than-expected sales pipelines.

The latest survey indicated a solid decline in new orders from abroad that was the fastest since June. Goods producers mostly cited subdued demand from clients in the UK, alongside challenging global economic conditions.

Despite a setback for new order books in March, the survey signalled a moderate increase in staffing numbers across the manufacturing sector.

Higher levels of employment have now been recorded for three months in a row, with extra hiring attributed to long-term growth strategies and new product launches.

That said, the rate of job creation eased slightly since February as some firms cited a headwind from subdued demand.

Greater workforce numbers helped to alleviate capacity pressures in March. This was signalled by a further modest reduction in unfinished work across the manufacturing sector. Fewer backlogs have been seen in each month since May 2022.

Manufacturers indicated a marginal rise in purchasing activity during March, but pre-production inventories were depleted for the sixth successive month.

Goods producers noted ongoing efforts to streamline inventories, despite some concerns about the impact of Red Sea shipping delays on supplier performance.

Stocks of finished goods were also reduced in March, albeit at the slowest pace for six months.

While manufacturers noted that transportation delays had an adverse impact on supplier performance during the month, this was offset by improving raw material availability and weaker demand conditions.

As a result, the latest survey indicated that vendors’ lead times shortened for the first time in four months and to the greatest extent since June 2023.

Higher transport costs, rising commodity prices and elevated wage pressures all contributed to a robust increase in overall cost burdens at manufacturing companies. The rate of input price inflation accelerated for the second month running to its highest since February 2023.

Factory gate price inflation, meanwhile, hit an 11-month high as goods producers sought to pass on rising purchasing costs to clients.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter

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