Irish firms report December decline as orders fall

IRISH MANUFACTURING firms said conditions deteriorated again in December, as new orders fell sharply on the back of fragile economic conditions and uncertainty in the euro zone.

The news came as separate figures showed that the US manufacturing sector expanded in December at the fastest pace in six months, in another sign of firmer economic growth in 2011’s final quarter. The Institute for Supply Management’s purchasing managers’ index rose to 53.9, the highest reading since April.

According to the NCB Purchasing Managers’ Index, which provides a measure of the health of the Irish manufacturing industry, the sector shrank again last month, with a reading of 48.6 for the month.

“That said, the rate of contraction was slower than that seen in the previous month, and only slight,” the report said.

Readings above 50 indicate expansion, with those under that figure pointing to contraction.

New orders fell sharply to 46.0 from 49.7 a month earlier, and the weak demand led to a slight cut in production and a reduction in outstanding business that was the fastest in three months.

Input costs continued to rise, while increased competition led to a fall in output prices. However, there was some positive news, with export orders growing slightly during the month, at 50.8. This follows a reading of 49.9 last month.

“Despite the slowdown in global growth, Irish exports will remain positive in 2012,” NCB chief economist Brian Devine said. “We once again expect a large positive contribution from net exports in 2012 and for this contribution to outweigh the continued weakness in the domestic part of the economy.”

Employment also increased slightly in December with a reading of 50.5, the first rise since August.

NCB said gross domestic product would grow by 0.7 per cent in 2012, but employment would continue to fall, making it a fifth year of decline.

In the US, the outlook for demand improved as new orders rose and manufacturers and customers both drew down inventories.

“Manufacturing is finishing out the year on a positive note, with new orders, production and employment all growing in December at faster rates than in November,” said Bradley ­Holcomb, chair of the ISM’s survey committee.

The data followed readings from China and India showing manufacturing expanded last month, although at a tepid pace. Factory activity in the euro zone shrank for a fifth straight month as confidence was eroded by the sovereign debt crisis.

“[The US report] suggests improvement in the overall macroeconomic environment or at least sentiment,” said Holden Lewis, industrial analyst for BBT Capital Markets.

But with “flattish” economic conditions around the globe, he said the trend would have to continue through February to suggest a more meaningful recovery was under way.

In Britain, the manufacturing sector beat expectations in December, indicating signs of stabilising after a two-month decline as orders from China and Germany picked up, although the risk of another recession persists.

The Markit/CIPS Manufacturing Purchasing Managers’ Index rose to 49.6 from an upwardly revised 47.7 in November, data compiler Markit said. Over the fourth quarter as a whole, the sector registered its worst performance since the second quarter of 2009 when Britain was in deep recession, said Markit economist Rob Dobson.

“Manufacturing will therefore likely be a drag on the Q4 GDP figures,” he said. – (Additional reporting, The Financial Times Limited 2012)