‘Significant pickup’ in manufacturing output in February

Latest manufacturing PMI shows ‘marked improvement for sector’, says AIB chief economist

There was a “significant pickup” in Ireland’s manufacturing output in February, reversing six months of decline with growth accelerating to the highest in almost two years.

The latest manufacturing purchasing manager’s index (PMI) from AIB rose to 52.2 in January, from 49.5 in January.

The index is compiled from an S&P Global survey of about 250 manufacturers in Ireland, with a figure greater than 50 indicating overall improvement of the sector.

Chief economist with AIB, David McNamara, said the February PMI shows a “marked improvement for the sector” and a “significant pickup in output”, being the first expansion in six months and the highest level for the index since June 2022.

READ MORE

“A sharp rise in output and employment, alongside renewed new orders growth were the key features of the February PMI survey,” he said.

The bank noted that output growth gained “considerable momentum” last month, as respondents commented on improving sales pipelines and a turnaround in order books after a soft patch at the beginning of the year.

For the first time in nearly two years there was a back-to-back monthly upturn in production volumes, and February’s rate of expansion was the steepest since April 2022.

Why did Bank of Ireland shares plummet despite record profits?

Listen | 46:58

Total new work increased for the first time in three months, and at the fastest rate since May 2022. AIB said this appeared to have been supported by greater domestic demand as export sales saw a slight decline in February. Subdued UK economic conditions were cited as a factor holding back new orders from abroad.

Staffing numbers also expanded in February as manufacturers sought to boost production schedules and support long-term business development plans.

The recovery also spurred an upturn in new purchases of inputs, with this index rising for this first time since June 2022. However, stocks of purchases and finished goods declined as manufacturers managed inventories conservatively, in light of weak client demand in recent months.

Mr McNamara said a “concerning trend” is the continued disruption to shipping routes in the Red Sea, to which respondents attributed longer delivery times and higher input prices in February. He noted that this drove the first increase in output prices since April of last year.

Looking ahead, the proportion of manufacturers expecting to boost production in the next 12 months (39 per cent) continued to exceed those forecasting a decline (8 per cent).

“Manufacturers remained broadly optimistic about the outlook for the year ahead as firms linked this optimism to expansion plans and stronger client demand. However, the business expectations index still eased to its lowest level since April 2023 due to ongoing economic uncertainty,” he said.

Ellen O'Regan

Ellen O’Regan

Ellen O’Regan is an Irish Times journalist.