Survey reveals marked decline in manufacturing activity

Tue, Oct 4, 2011, 01:00

A MONTHLY survey published yesterday suggests that Irish manufacturing activity contracted at its sharpest rate in two years last month.

According to the latest NCB Purchasing Managers’ Index, new export orders also fell for the first time in a year in September.

Corresponding surveys from other economies showed that manufacturing activity in the euro area as a whole contracted in September, the second consecutive month of contraction.

In the US and Britain, by contrast, headline PMI readings rose unexpectedly in September. Those surveys have partially allayed fears that the two largest Anglophone economies are returning to recession.

Ireland’s manufacturing PMI fell to 47.3 in September from 49.7 in August (a reading below 50 equates to a contraction in activity).

One of the 11 subindices 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 survey indicated that new orders, both for exports and the domestic market, fell for a fourth consecutive month. The rate of contraction was “marked”, accelerating to the sharpest rate recorded since August 2009.

The employment subindex, which registered a surprise uptick in August, recorded a sharp decline in September, the fourth occasion 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 subindex of input prices, 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. “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.