Manufacturing activity stays near record high as new orders rise at fastest rate ever

AIB’s June PMI points to strong pick-up in activity as economy gradually reopened

Production rose for the fourth month running, ‘the most sustained period of growth in over two years while new export orders also rose strongly but at a slower rate than total new work. Photograph: iStock

Production rose for the fourth month running, ‘the most sustained period of growth in over two years while new export orders also rose strongly but at a slower rate than total new work. Photograph: iStock

 

Manufacturing activity remained at a near record high in June as new orders rose at the fastest rate ever, leading to the second strongest expansion in output to date.

The latest AIB Ireland Manufacturing PMI pointed to a strong pick-up in activity as the economy gradually reopened after months of lockdown.

The headline index recorded a level of 64 in June, just shy of the all-time record high of 64.1 in May. Any figure greater than 50 indicates overall expansion of the sector.

The sub-index for new business growth accelerated for the third month running to a new survey record in June. The data also pointed to surging domestic demand as more sectors saw restrictions loosened.

Production rose for the fourth month running, “the most sustained period of growth in over two years” while new export orders also rose strongly but at a slower rate than total new work.

The survey revealed further pressure on capacity in June with backlogs of work rising for the fourth consecutive month. Employment in the sector also rose at the third-fastest rate in the survey’s history in June, thanks to a combination of recruitment linked to rising demand and the return of furloughed staff. Employment in the sector has risen every month since October 2020.

‘Global boom’

Oliver Mangan, AIB chief economist, said: “Activity in the sector is clearly picking up strongly as economies reopen following the easing of Covid restrictions in Ireland and elsewhere over the second quarter of the year.

“Indeed, there is a global boom under way in manufacturing. The Irish data are very much in line with very strong PMI June readings for the UK, Euro zone and US of 64.2, 63.1 and 62.6, respectively, as the recovery in the global economy gathers momentum,” he said.

“The sub-components of the Irish PMI survey all point to continuing rapidly improving business conditions in manufacturing. Output rose at a near record pace, driven by rebounding demand, with record growth in new orders as businesses re-open.

“As a result, backlogs of unfilled orders also rose at a near record pace,” he said.

However, he cautioned that supply chains remain under severe pressure owing to Brexit related customs checks, transport delays in shipping and raw materials shortages.

“These factors, combined with strengthening demand, saw further strong upward pressure on both input and output prices, with rises becoming more broad based,” he said.