Growth in demand for Irish goods speeds to four-month high

Output growth slows to 10-month low due to material and staff shortages, PMI data shows

Demand for Irish goods in the manufacturing sector increased at the fastest rate in four months in January, although output growth slowed to a 10-month low due to ongoing material and staff shortages.

The latest PMI data from AIB shows a faster increase in new orders boosted the sector, but cost pressures remained severe despite easing further from October’s series record high. That led to the slowest rise in output prices in five months.

The PMI rose to 59.4 in January from December’s nine month low of 58.3. The headline is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50 indicates overall improvement of the sector.

The latest figure signalled a "strong overall improvement" in manufacturing business conditions, and was higher than in any survey period prior to April 2021, AIB chief economist Oliver Mangan said. It was only fractionally below its 2021 average of 59.7.

The month-on-month gain was only the second registered since May’s record high. It was reflected in four of the five components, the exception being output.

The largest positive directional influences were provided by suppliers’ delivery and new orders.

Demand for Irish-manufactured goods rose for the 11th month running. Moreover, the rate of growth accelerated to the fastest since September, partly linked to new customers.

Export demand also improved following subdued increases throughout the final quarter of 2021.

Staff shortages

Although new business inflows quickened, Irish manufacturing output failed to keep pace due to ongoing material and staff shortages.

Production rose for the 11th month running, albeit at the weakest rate since March. That said, growth remained strong overall in the context of the survey history.

With growth of output slowing, manufacturers continued to fulfil orders by selling direct from existing stock. Inventories of finished goods declined for the seventh consecutive month, and at the fastest rate since August.

Backlogs of work continued to rise, reflecting pressure on capacity from stronger new orders, supply shortages and high levels of staff absences. The rate of growth quickened since December and was among the strongest on record.

Manufacturers continued to add to their workforces to address capacity constraints and in expectation of higher output requirements in 2022.

Staffing in the goods-producing sector rose for the 16th consecutive month, and the rate of job creation picked up from December’s 10-month low.

Purchasing of inputs sped up in line with the faster increase in new orders. Buying activity rose at the strongest rate since August, with firms also linking higher purchases to efforts to secure stocks ahead of expected price increases and supply delays.

Input stocks rose at one of the fastest rates on record, while supply chains remained stretched. Input lead times lengthened to a greater extent than in December, albeit less so than the trend seen over 2021 as a whole.

Inflationary pressures in the manufacturing sector remained severe, but showed signs of easing. Input and output prices both increased at the slowest rates since August, albeit ones that remained among the highest on record.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter