Irish manufacturing sector gains momentum in August

Activity in the Irish manufacturing sector gained momentum in August, reaching a seven-month high on the back of sharp increases in both output and new orders.

The Investec Manufacturing PMI Ireland, published on Monday, rose to 57.5 in August, a seven-month high, from 56.3 in July amid sharp increases in both output and new orders.

The figures show that new order growth quickened to the fastest in the year so far, with strong demand reported from both domestic and export markets. The rate of expansion in new export orders was “marked” Investec said, and the highest in three months, with panellists citing the United Kingdom, the euro zone and the Middle East as sources of new work.

However, margins remained under pressure, on the back of sharp increases in input costs, for a range of raw materials including metals and timber, during August.

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Supply shortages were also mentioned as a source of cost inflation in some cases, as well as contributing to delays in the receipt of purchased items.

“Although firms were able to defray at least a portion of this cost inflation by raising output prices, a seventh successive decline in the profitability index was recorded,” said Philip O’Sullivan, economist with Investec.

Looking ahead, Investec said that the forward-looking future output index remains “very elevated” and reached a three-month high in August. Some 56 per cent of respondents said they expect a rise in production over the coming 12 months, while just 4 per cent anticipate a decline.

“With a positive economic backdrop both in Ireland and abroad, we think this optimism is well-founded,” Mr O’Sullivan said.

UK and euro zone

In the UK, the headline PMI fell to its lowest level for over two years, as growth of output and new orders slowed and the pace of job creation slumped to near stagnation. The latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter, IHS Markit, which compiles the survey, said.

Across the euro zone, performance was mixed. In France, manufacturing activity picked up in August, albeit less than previously thought, boosted by domestic orders as trade tensions clouded the outlook. In Germany however, growth slowed on weaker export orders and confidence softened by the threat of trade frictions.

– (Additional reporting: Reuters)