Manufacturing sector expands, but at slower pace

The manufacturing sector continued to expand again last month - albeit at a slower pace than earlier in the year - despite a sharp increase in input costs, data published yesterday showed.

The NCB Purchasing Managers Index (PMI) for the manufacturing sector edged up to 54.2 in September, from 54.1 in August, marking the 37th month of growth in the industry. While in recent months the index has fallen back from the six-year high it hit in June, it has remained consistently above 50 - a level that signifies growth over the previous month. Any reading below 50 indicates a contraction in activity.

Eunan King, senior economist at NCB, said September output had grown at "about the same pace as the previous two months," a level he described as respectable.

"Orders growth held up, despite a deceleration in export orders, implying robust domestic demand," he said. "Input prices accelerated a little, while output prices continued to rise at about the pace of most of this year. It seems a case of continued steady expansion."

Manufacturers in the Republic reported continued growth in new orders, though at 55.3, the actual reading was little changed from the prior month. Firms attributed the ongoing growth to the introduction of new product lines and an improvement in underlying demand. They also said improvements in staff productivity had led to output gains. Export orders stood at 50.7, compared with 52.6 in the previous month.

To cater for the demand, firms were forced to raise production - an element of the index that has increased in each month since September 2003.

Meanwhile, input prices rose at a substantial pace, with a number of firms reporting increases in raw material prices. However, output costs also rose, helping to offset this a little, meaning that some firms passed on the higher costs to customers.

Elsewhere, staffing levels registered an increase for the sixth consecutive month. - (Additional reporting, Reuters)