Weak euro still stoking expansion in manufacturing

Ireland’s manufacturing sector is continuing to expand with exporters benefiting from a weak euro.

Investec’s latest manufacturing purchasing managers’ index (PMI) improved marginally to 53.8 in September, comfortably above the 50 mark that indicates growth and up from an 18- month low in August.

The figures come as PMI data for the euro zone dipped and the figure for the key Chinese economy stalled.

Despite a strengthening of the euro relative to sterling in September, respondents in Ireland again identified the UK as a key source of new business. The sub-index for new export orders has now posted 27 successive months of growth.

The latest survey of activity in the sector also recorded positive readings for the quantity of purchases and for employment. However, it said other components suggested production was running ahead of new orders, with the work backlog component falling for the fourth time in five months and at a rate of depletion that exceeded August’s pace.

Slight uptick

“We had described the previous month’s PMI release as being more downbeat compared to what we had grown accustomed to over the preceding 18 months, so we are relieved to see a slight uptick in the implied pace of expansion for the sector in September,” said Investec’s Philip O’Sullivan.

“Notwithstanding the troubled signs in a number of emerging markets and uncertainty around central-bank actions in Ireland’s key non-euro zone trading partners, we continue to view the sector as having more tailwinds than headwinds and, to that end, expect to see a stronger finish to 2015.”

In the euro zone, where the central bank is six months into a €1.1 trillion asset purchase programme, the PMI survey data showed manufacturing output weakened slightly last month.

Markit’s final euro-zone manufacturing PMI was 52 last month, lower than August’s 52.3. Factories in Europe’s number one economy, Germany, performed better, however, driven by strong output from consumer goods producers and rising new orders.

The PMIs also showed French manufacturing grew more quickly than first thought in September. British factory growth lost steam and shed jobs for the first time since 2013.

US manufacturing growth

Growth in the US manufacturing sector rose slightly in September but was still at its second-lowest level since October 2013, according to Markit. The final US manufacturing PMI inched higher to 53.1 in September from 53 in August, which marked the lowest level since October 2013.

China’s official factory gauge stabilised around a three-year low as government stimulus measures showed signs of steadying the weakness in manufacturing.

The official purchasing managers index climbed to 49.8 in September, the National Bureau of Statistics said yesterday, compared with 49.7 in August. A separate PMI gauge from Caixin Media and Markit Economics also showed improvement from its initial reading, with the final September number climbing to 47.2.

The reports signal that five central bank interest-rate cuts since November and the government unleashing new rounds of infrastructure spending are gaining traction, helping to cushion the world’s second- largest economy.

Still, excess capacity and factory-gate deflation are pressuring China’s manufacturers, adding headwinds for the government’s 2015 growth objective of about 7 per cent. – (Additional reporting: Reuters)