Index shows weaker deterioration of business conditions in September

THE PACE of contraction in the Irish manufacturing sector has declined, according to the NCB Purchasing Managers’ Index (PMI) published yesterday.

The PMI, a measure of activity in the manufacturing sector, found a slower fall in both output and new orders during September, as well as steep price discounting due to heavy competition and a continued share decrease in employment.

The NCB PMI – an indicator designed to provide a single figure measure of the health of the manufacturing industry – rose to 46.6 in September from 44.0, pointing to a weaker deterioration of business conditions over the month.

Although production fell again in September as new orders declined, the latest fall was the slowest in the current 19-month period of contraction.

New business also fell at a slower pace during September, although panellists continued to see lower demand due to the broader economic downturn in Ireland. The reduction in overall new business was registered despite a slight increase in new export orders.

Signs of demand improvement in some foreign markets was behind growth, which ended a sequence of 18 successive falls.

As overall new business fell, Irish manufacturers made further inroads into backlogs of work, NCB reported. Consequently, outstanding business dropped for the 39th month running.

Spare capacity was also identified as a key factor behind the most recent drop in staffing levels.

Employment fell “substantially” despite the rate of job shedding easing to its weakest since May 2008.

September data signalled a sharp reduction in input prices as suppliers competed for new orders.

“Input costs have decreased in each month since November 2008. In turn, Irish manufacturers cut output charges at a considerable pace, both in response to intense competition and in an attempt to stimulate demand,” NCB reported.

Irish manufacturing companies cut their purchasing activity again in September, extending the current period of decline to 22 months, although the survey noted the latest fall was the weakest since August 2008.