Irish manufacturers upbeat despite downturn in international demand

Latest PMI data from AIB shows inflationary pressures cooled in January but high energy and supplier prices added to burden

Manufacturers registered their strongest degree of business confidence in almost a year last month despite a sustained downturn in international demand for Irish manufactured goods, according to AIB.

Business conditions in Ireland’s manufacturing sector were stable in the first month of 2023, according to the bank’s latest PMI data for the sector. While the current lull in demand reportedly continued to contribute to sustained reductions in output and new orders, rates of decline softened for both. As such firms were more positive about their future and registered the strongest degree of confidence in 11 months.

The headline rate rose from 48.7 in December to 50.1 in January to signal a broad stabilisation in overall operating conditions. Any figure greater than 50 indicates overall expansion of the sector.

The latest reading was the strongest in three months, breaking the previous two-month sequence of decline.


A softer reduction in order book volumes contributed to the uplift. In fact, the latest fall in new orders was the weakest in the current eight-month sequence of decline, and eased markedly from December’s 31-month record.

That said, overall demand conditions remained relatively muted amid ongoing reports of a general market slowdown. Meanwhile, the downturn in international demand for Irish manufactured goods was sustained and strengthened since December.

Irish goods producers reportedly cut output to adjust for weak demand conditions and subsequently, for the seventh time in eight months, Irish production volumes contracted in January.

To reflect falling orders and lower output, firms cut back purchasing activity for the fifth consecutive month in January. By contrast there was a sustained and solid accumulation in pre-production inventories.

January survey data again displayed evidence of spare capacity in Ireland’s manufacturing sector. Against a backdrop of subdued demand, firms focused on working through existing orders and building up stocks of finished products. There was a reduction in backlogs for a ninth month in a row, and one that was sharp overall and the steepest since June 2020. Meanwhile, post-production inventories accumulated for the seventh successive month and at the second fastest pace in survey history.

It was the second successive month where Irish manufacturing firms added to their workforce numbers. That said, the rate of job-creation was weaker than seen in most months over the past two years.

Another advancement came from a renewed improvement in vendor performance. The latest improvement was the most pronounced since July 2013, and followed a 38-month sequence of consecutive deterioration.

Concurrently, inflationary pressures cooled in January, as indicated by rates of input cost and output price inflation sinking to 24- and 22-month lows respectively. That said in both cases rates were stronger than their historical averages. Reportedly high energy and supplier prices continued to add to average cost burdens.

However, optimism persisted across the sector. In fact, the overall degree of confidence was the strongest since last February amid hopes for a general market improvement. That said, some concerns about the current inflationary environment remained.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter