Manufacturing sector gets off to strong start for 2018

Ireland’s manufacturing sector got off to a positive start in 2018, new data showed, with further growth expected during the year.

The Investec Manufacturing Purchasing Managers Index eased from an all-time high recorded in December, but still indicated a sharp improvement in activity, with the headline index at 57.6 for the month.

Strong demand continued from domestic and overseas customers, with new orders showing an 18th successive increase. New export orders were also higher, with rate picking up compared with the exit rate for 2017.

Employment in the sector continued to grow, but backlogs of work also rose.

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“There is evidence that manufacturers are positioning themselves for ongoing strong customer demand in the months ahead, with Stocks of Purchases increasing, while Stocks of Finished Goods rose for a third successive month, notwithstanding the uptick in client orders,” said Investec’s Philip O’Sullivan. “We also note that the Future Output index of expectations increased at its fastest pace in 14 months, which suggests that December’s record Manufacturing PMI reading may be eclipsed in the coming quarters.”

Higher commodity prices such as oil and steel pushed input prices higher for manufacturers, rising at their sharpest rate in almost a year. Only 10 per cent of panelists were able to meet these costs with increased output prices on a like for like basis. However, the profitability index was positive for a ninth month, lifted by volume growth.

Looking ahead to the rest of the year, Mr O’Sullivan noted recent global growth forecasts that indicated growth of 3.9 for each of 2018 and 2019. “This stronger backdrop augurs well for the Irish manufacturing sector, which is highly leveraged to international events,” he said. “We expect to see further strong Manufacturing PMI readings as 2018 progresses.”