Manufacturing expanded in September for the 13th month in a row, but the overall rate of expansion slowed, with weaker export sales being cited as one of the main reasons, according to a new survey. Barry O'Keeffe reports.

The NCB Purchasing Managers' Index, which measures the health of the manufacturing sector, found that improved business conditions continued to be driven by rising levels of new business.

The index stood at 52.6 in September, down from August's reading of 54.7. A reading above 50 represents growth.

"However, despite remaining solid, the rate of growth of new orders eased sharply, compared to the previous month," it said.

Firms attributed the slower growth of new orders to strong competition in the domestic market (partly due to cheaper foreign imports) and to weaker sales growth in key export markets - most notably to the US.

The survey found that as well as purchasing new orders, firms were again able to redirect spare capacity to help clear existing orders. As a result, backlogs of work were reduced for the sixth month in a row and at a sharper rate than in August.

The survey also found that despite the lack of pressure on capacity, manufacturing employment rose for the eighth month running.

"However, the rate of growth eased and was only slight, reflecting slower growth of new orders," according to NCB.

The survey found that suppliers were again unable to met delivery schedules last month. The lengthening of lead-times was little changed from August's rate and was widely blamed on global shortages of certain raw materials, particularly steel.

"Supply-side bottlenecks pushed up the price of those goods in limited supply which, along with rising oil prices, led to a further substantial rise in average input prices in September."

Firms said there was a modest rise in the average prices charged for their finished goods during September. However, the extent of the increase in input costs meant that gross margins continued to be squeezed.