Ninth month of growth for manufacturing sector
PMI index points to a further rise in employment in the sector as February’s storms delay deliveries; Germany continues to drive manufacturing expansion across Eurozone
High waves wash over the bandstand, forcing the closure of the East Pier Dun Laoghaire, during February’s storms. Investec’s PMI index for February shows that the bad weather contributed to longer delivery times from suppliers, likely contributing to the steep drop in the stock of both purchases and finished goods held by Irish manufacturing firms. Photograph: Eric Luke / The Irish Times
Activity in Ireland’s manufacturing sector expanded for the ninth consecutive month in February, despite an easing in growth across the Eurozone.
According to Investec’s monthly Purchasing Managers’ Index (PMI), the index rose to 52.9 in February, up fractionally from a reading of 52.8 in January. A reading above 50 indicates growth in activity.The rate of growth in production eased in February, but new orders increased at a faster pace, leading firms to raise their rate of job creation. Input cost inflation remained broadly stable, while manufacturers lowered their output prices for the second month running.
Philip O’Sullivan, chief economist with Investec Ireland, said that a key highlight of February’s index was the employment component, as employers added to payrolls for a ninth successive month in February, with the pace of increase improving to a four month high.
“This job creation was underpinned by rising new orders (which expanded at the second-fastest pace in the current eight month sequence of growth). New orders were aided by improved demand from the UK and Europe, which chimes with the pick-up in economic indicators in those crucial trading partners for Ireland. Interestingly, a number of panellists reported that the recent stormy weather had contributed to longer delivery times from suppliers. This also likely contributed to the steep drop in the stock of both purchases and finished goods held by Irish manufacturing firms,” he said.
On the margin side, input prices rose for a seventh successive month in February, while “disappointingly” output prices fell for a second month running, with firms attributing this to competitive pressures, Mr O’Sullivan added.
New export orders also rose, with a number of respondents indicating that demand from the UK and other European markets had picked up during February.
Across the Eurozone, growth in factory activity eased from January’s two and a half year high, but for the first time in almost three years output rose in all of the region’s four biggest economies.
The broad-based expansion was again led by Germany, Europe’s biggest economy, while France eked out growth in output. Spain and Italy both bounced back strongly.
Markit’s final Eurozone Manufacturing Purchasing Managers’ Index came in at 53.2 last month, up from a flash reading of 53.0 but below January’s 54.0 - which was the highest since May 2011. The index measuring manufacturing output, which feeds into a composite PMI that is seen as a good gauge of growth, fell to 55.3 from January’s 33-month high of 56.7.
“The dip in the manufacturing PMI, its first fall for five months, is a disappointment and a reminder of the hesitant nature of the region’s nascent recovery.” said Chris Williamson, chief economist at Markit. “However, we should not lose sight of the fact that this is the second-strongest reading that the euro zone has seen for almost three years.”
(Additional reporting Reuters)