Manufacturing slides into ‘sharpest decline’ since 2009

The manufacturing sector recorded its sharpest decline since August 2009 in March as the coronavirus outbreak spread, according to AIB data.

The March AIB purchasing managers index (PMI) survey of Irish manufacturers detailed a sudden severe downturn at the end of the first quarter, with the sector falling firmly into contraction.

The headline figure dropped to 45.1 from 51.2 in February. Any figure below 50 indicates contraction.

The month-on-month drop, at 6.1 points, was the largest on record since the survey began in May 1998, surpassing the 5.7-point fall in February 2009 during the depths of the global financial crisis.

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"Further sharp falls in the PMI are likely over the next couple of months. The Irish index troughed at below 35 during the last recession in 2008-09," said AIB chief economist Oliver Mangan.

The volume of new orders received by Irish manufacturers declined rapidly in March with the rate of contraction the fastest since April 2009.

Meanwhile, the seasonally adjusted output index fell by a record 8.9 points, signalling the fastest contraction in manufacturing production since June 2009. “Expectations for output levels in 12 months time have fallen by 22.8 points in the past two months,” said Mr Mangan.

With output and new orders falling significantly, manufacturers moved to shed staff in March, with employment falling at the fastest rate since July 2009. Companies reported adjusting their workforce to reflect a lack of activity, new orders and cancelled projects.

As a result of the uncertainty, the 12-month outlook for production was the worst on record in March with a number of companies surveyed noting that the economic fallout from the measures taken globally would take some time to unwind.

“Overall, the PMI data confirm that there was an abrupt and steep fall in manufacturing in March. Worse is to come, but there is also scope for a sharp rebound in activity when the coronavirus pandemic abates,” added Mr Mangan.

AIB’s manufacturing PMI survey is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of about 250 manufacturers.