Confidence in manufacturing rises

Confidence in the manufacturing sector has increased and input cost inflation has eased, the latest Purchasing Managers Index (PMI) from NCB stockbrokers suggests. However, a detailed breakdown of the index suggests that this confidence is becoming more reliant on the domestic economy.

From a reading of 51.7 in March, the overall PMI rose to 53.3 in April as the level of new orders rose. The move brings the latest reading of the PMI further away from the critical benchmark reading of 50, below which a reading indicates declining activity.

However, the figure for export orders declined from 51.5 in March to 48.0 in April, suggesting the strength of demand for products was domestically driven. The indicator has remained within the 50 to 55 band since 2003, when it last dipped below 50.

Results from a series of sub-indices that accompany the overall index were also broadly positive. The employment index rose above the 50 threshold to reach 50.7 in April while, at 58.9, the index for input costs remained strong but less so than the March reading of 63.3, suggesting some easing off in input prices in the month.

"Solid growth resumed in April, driven by a strengthening in new orders, especially from the domestic economy. Employment growth also recovered in April, albeit at a modest rate," Dermot O'Brien of NCB stockbrokers said yesterday. The index, which is conducted in most leading world economies, is compiled in Ireland by NCB stockbrokers.

According to the euro zone PMI, also released yesterday, manufacturing increased at its fastest pace in 10 months in April, rising to a seasonally-adjusted 54.6, up from 53.4 in March.

NTC research, which compiles the PMI in the euro zone, said the results pointed to gathering strength in the euro zone's two largest economies.

The French PMI index rose to 58.6, its second highest level ever, up from 56.8 the previous month. In Germany the index jumped to 55.6, up from 52.8 in March.

The British index fell to 53.9 in April from a downwardly revised 54.2 in March. Analysts had predicted an easing to 54.0. This may reflect the strength of sterling, which rose to $2 last month.