Manufacturers are optimistic about the outlook for production in 2026, with more than four in 10 predicting a rise in output and just 6 per cent expecting a slowdown, new data from AIB shows.
The bank’s December purchasing managers’ index (PMI) report for the sector showed a moderate upturn in sector performance as last year ended, supported by sustained rises in output, new work and employment.
In terms of outlook for the year ahead, the degree of optimism was weaker than the 11-month high seen in November.
The report said anecdotal evidence suggested hopes of a turnaround in demand conditions and planned new business expansion in export markets had underpinned confidence in the year ahead outlook for growth. However, the report said the December data suggested an overall loss of momentum since November, largely due to weaker new order growth.
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At 52.2 in December, the overall PMI figure eased from 52.8 in November but remains comfortably above the 50 threshold separating growth from contraction. December was the 12th consecutive month of growth for the manufacturing sector.
The latest reading is also fractionally above its long-run average of 52 and signalled a moderate overall improvement in manufacturing sector performance.
Efforts by suppliers to pass on higher raw material prices resulted in a robust increase in average cost burdens across the manufacturing sector. The overall rate of input price inflation was the fastest since July.
In contrast, factory gate prices rose only fractionally and at the slowest pace for 19 months. Survey respondents widely commented on squeezed margins and intense price competition.
Growth in overall output was maintained in December, although the rate of expansion slipped from November’s four-month high. Where higher levels of production were reported, this mainly reflected improved order books.
Total new work increased only slightly at the end of 2025 and the pace of growth lost momentum since November.
A renewed dip in export sales weighed on manufacturing order books, while manufacturers also commented on subdued demand conditions and intense competition for new work.
Recruitment was a bright spot last month as goods producers took on more staff to meet new projects and deliver long-term capacity expansion plans. Employment has risen in each of the past 13 months and the rate of job creation accelerated since November.
Greater workforce numbers contributed to a renewed fall in backlogs of work across the manufacturing sector. Manufacturers boosted their purchasing activity at the end of the year.
Higher levels of input buying have now been recorded for four months in a row, but the latest rise was the weakest seen over this period.
Stocks of purchases meanwhile decreased slightly, which continued the trend seen since August. There was also a much slower reduction in stocks of finished goods, with the rate of depletion the least marked for six months amid reports of less cautious inventory strategies.
Supply chain performance remained a challenge for manufacturing firms in December. The latest report indicated a sharp lengthening of average lead times among vendors. This was often attributed to stock shortages at suppliers and international transportation delays.
