Irish manufacturing activity expands again in May

Activity in Ireland’s manufacturing sector expanded to a three-month high in May, with the speed of growth of output quickening to a nine month high.

According to Investec’s latest Purchasing Managers’ Index, which shows the health of the manufacturing industry, growth in the Irish manufacturing sector increased to 57.1 in May from April’s 55.8 reading, in a sequence of expansion that now runs to two years. The reading now stands at its highest level in three months.

Philip O'Sullivan, chief economist at Investec Ireland, said that there was a "quickening" in the rate of growth in new orders, aided by new product launches.

“The pace of expansion implied by the new export orders index also increased last month, with euro weakness a factor behind this improvement,” he said.

The survey shows that four times as many companies are expanding employment in the sector than contracting. Close to 2 per cent of panellists reported a rise in employment, which they mainly linked to greater production requirements.

Input costs increased for a third successive month due to the recent weakness of the euro against both sterling and the US dollar.

“Firms were able to defray at least some of this pressure by raising output prices, but the increase here was only slight and slower than in the previous month,” Mr O’Sullivan said.

Mr O’Sullivan added that the renewed strength in the pound, relative to the single currency since the election, is providing a renewed tailwind for the 15 per cent of Irish merchandise exports that go to Ireland’s next door neighbour.

“This should lead to further positive Investec Manufacturing PMI readings for Ireland in the coming months, assuming that developments in Greece don’t take a turn for the worse” he said.