Output and employment increase during June

Ireland’s manufacturing sector showed an improvement in June as operating conditions strengthened for the first time in four months.

Output and employment rose during the month, the latest new survey shows, leading to an overall improvement in the Investec Purchasing Managers' Index, a seasonally adjusted measure of the health of the industry.

The overall index rose from 49.7 in May to 50.3, above the 50 mark that separates expansion from contraction.

The growth may only have been marginal but Investec Ireland's chief economist Philip O'Sullivan said it could be the start of an improving trend for the sector.

Indicators
"A likely pick-up to back above the 50.0 no-change level had been signalled by some of the more forward-looking indicators in May's PMI report, so this turnaround is as we would have expected," he said.

Reports were mixed from firms across the sector, however, with some experiencing improving demand, but others finding conditions remaining weak.

New orders showed a contraction, the fourth month in a row that the index has fallen behind, but Mr O’Sullivan said the decline was marginal and had slowed its pace.

An acceleration in the pace of drop-off in the new export orders sector came as somewhat of a surprise given the easing of some pressures cited by Irish manufacturers as headwinds.

Lower steel and plastic prices contributed to a decline in input costs, reversing a trend that had been observed for the past 11 months.

“However, this tailwind to margins was somewhat offset by yet another decline in output prices, which have now fallen in three of the past four months,” Mr O’Sullivan said.

The rise in employment was viewed as good news, with hiring returning to the sector following three months of job cuts. Just under 20 per cent of those involved in Investec’s survey said they had boosted staff levels in recent months as capacity increased and new products were introduced.

“Given the improving growth prospects for many of Ireland’s key trading partners, we expect this improvement to be sustained over the rest of 2013 and beyond,” Mr O’Sullivan said.