Manufacturing employment rises at fastest rate in 12 years
THE MANUFACTURING sector of the Irish economy rose again last month, with employment in manufacturing increasing at the fastest rate in more than 12 years.
Overall, activity in the manufacturing sector increased in June at its fastest rate in over a year, according to the NCB purchasing managers’ index. The index hit 53.1 last month, up from 51.2 in May.
But the latest data came as comparable figures for the US showed manufacturing activity contracting for the first time in three years, further denting confidence in a global economy that is feeling the effects of a euro zone debt crisis and China’s economic slowdown.
In a shock to economists who were expecting manufacturing growth to slow moderately, the Institute for Supply Management’s (ISM) survey on the US industrial sector reported a large decline in activity from 53.5 in May to 49.7 in June – its lowest level since the recession ended in mid-2009.
Any figure below 50 marks contraction, while those above 50 signal growth.
David Semmens, economist at Standard Chartered, described the number as a “really terrible” result.
The weak ISM data came after purchasing managers’ surveys showed China’s industrial sector expanded at its slowest pace in seven months, while euro zone manufacturing remained stuck at its weakest level in three years.
“A significant part of the weakness looks to be trade contagion,” said Alan Ruskin of Deutsche Bank.
Euro zone manufacturing activity has contracted each month since August 2011. In Germany, the euro zone’s largest economy, the index for June showed such activity shrinking at its fastest pace since June 2009.
In Ireland, the figures showed a rise in output, with a reading of 54.6, while new orders reached 53.6 and new export business continued to perform well, at 52.5.
NCB chief economist Brian Devine described the data a “healthy set of numbers which bodes well for the Irish economy”.
In a positive move for the industry, input costs showed their first fall in more than two years, as firms benefited from a general drop in commodity prices. Companies largely left prices unchanged over the month.
Record euro zone unemployment and continued manufacturing weakness could force the European Central Bank to lower rates later this week, according to Ken Wattret, an economist at BNP Paribas.
“There is little in these numbers to challenge the view that the ECB should be cutting rates,” he said. “The only question is by how much.”
In the UK, the purchasing managers’ index was better than many analysts had feared, but still showed manufacturing activity had contracted for the second month in a row. The Bank of England is expected to announce another round of quantitative easing later this week, given that the UK and global economy are far weaker than the bank’s monetary policy committee had thought even just a few months ago. – Additional reporting: The Financial Times Limited 2012