Irish manufacturers stockpiling ahead of Brexit

Irish manufacturers are stockpiling to guard against delays after Brexit as the sector recorded its weakest improvement last month since October 2016, according to the latest PMI figures.

The AIB purchasing managers' index, published on Friday, showed production growth eased to a ten-month low.

In line with output, inflows of new business expanded at a slower pace, one that was the weakest since November 2016. As a result of softer customer demand, the rate of job creation eased to a 16-month low.

The manufacturing industry posted a PMI of 52.6 at the start of 2019, down from 54.5 in December, signalling the weakest improvement in the health of the sector since October 2016. The 50 mark separates growth from contraction.

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Despite the slowdown, the rate of improvement was solid and business conditions have now strengthened in each of the past 68 months.

AIB chief economist Oliver Mangan said the slower pace of growth since last summer was "not surprising", as it is consistent with the loss of momentum by the global economy over this period.

“Anecdotal evidence from panellists also suggested that Brexit uncertainty was weighing on orders from the UK,” he said.

“The survey highlights that Ireland cannot be complacent about a continuation of the very strong growth that the economy has enjoyed since 2013. The pace of activity is likely to slow this year, but the economy is still expected to register strong growth.

“However, a slowing European economy, which is the destination for the bulk of Irish exports, and the continuing uncertainty around Brexit, are obvious downside risks for the Irish economy in 2019.”

Underpinning the slower improvement in manufacturing operating conditions was an easing of output growth.

Production expanded modestly in January and at the slowest pace in ten months. Panellists attributed this to softer demand both domestically and internationally.

New orders expanded for the 30th successive month in January. The rate of growth was solid, but slowed to a 26-month low. New export business also increased, albeit at the weakest pace since October 2016 amid reports of reduced UK orders.

With new order growth slowing, Irish manufacturers were able to deplete backlogs of work. The fall in outstanding business was the fastest since August 2016.

Post-production inventories increased for the second month running during January. The rate of accumulation was modest, but the fastest since January 2018.

A number of respondents increased inventory holdings due to new product launches in 2019, while others suggested that they had built stocks in order to guard against any delays resulting from Brexit.

On the employment front, Irish manufacturers continued to take on additional staff in January, with headcounts rising for the twenty-eighth successive month.

However, faced with softer customer demand from both domestic and international markets, the rate of job creation slowed to a 16-month low.

Purchasing activity increased for the twenty-ninth consecutive month during January. Despite this, the rate of growth eased amid weaker demand for Irish manufacturers.