New manufacturing orders set record high for third successive month

Supply shortages putting a brake on rapid rise in output as cost pressures mount

Business conditions at Irish manufacturers improved markedly in July, as new order growth hit a record high for the third month running, leading to "unprecedented increases" in both purchasing and backlogs of work, according to AIB.

The latest AIB Ireland PMI data shows output rose rapidly but was partly constrained by ongoing supply shortages. Cost pressures remained severe, and output price inflation accelerated to a new survey record pace.

The headline rate is a single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50 indicates growth in the sector.

The PMI registered a three-month low of 63.3 in July, down from 64 in June and May’s all-time high of 64.1.


Nevertheless, AIB said the latest figure still signalled a rapid overall improvement in Irish manufacturing business conditions at the start of the second half of 2021, and stronger growth than in any preceding period since the survey began in 1998.

The 0.7 point fall in the PMI since June reflected the employment, stocks of purchases and output components, although these all still provided strongly positive overall contributions.

Delivery times

The suppliers’ delivery times and new orders sub-indices had fractionally positive influences. Manufacturing new orders continued to boom in July, with the rate of expansion setting a new survey record for the third straight month.

The latest data signalled a notable increase in new export orders – the fourth-fastest expansion on record – although the domestic market continued to post stronger overall growth.

With customer spending continuing to rebound as Covid-19 restrictions were lifted, manufacturers boosted output again in July.

The rate of expansion was the third-strongest on record since the survey began, but eased further in comparison to growth of new orders. This resulted in a new record rate of increase in backlogs of work.

Outstanding business rose for the fifth consecutive month, and the rate of expansion surpassed May’s then-record pace.


Rising backlogs were partly attributed to ongoing supply shortages. Input delivery times continued to lengthen at one of the most marked rates in the survey history, linked to global raw material shortages and shipping bottlenecks.

Brexit-related customs issues were also reported. That said, the proportion of firms reporting delays in July, at 47 per cent, was slightly below the trend over the first half of 2021 (52 per cent).

Wide-ranging raw material shortages and insufficient shipping capacity continued to drive up input prices in July.

The rate of inflation eased from June’s near-record pace, but was still the third-highest in the survey history. Manufacturers continued to pass on higher costs to customers, with output price inflation setting a new record high for the fourth consecutive month.

Purchasing activity expanded at a record pace in July as firms built safety stocks in expectation of future price increases and shortages.

Pre-production inventories grew at the third fastest rate on record, albeit one notably slower than June’s peak. In contrast, post-production stocks declined sharply.

Output expectations rebounded in July following June’s brief dip in sentiment. More than half of firms (54 per cent) expect growth over the next 12 months from current levels, compared with less than 3 per cent predicting a decline.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter