Rebound in manufacturing loses speed amid pick-up in coronavirus cases

Latest AIB purchasing managers’ index remains positive but growth slows

New export orders rose for the third straight month but at a much slower rate than in July.  Photograph: Alan Betson / The Irish Times

New export orders rose for the third straight month but at a much slower rate than in July. Photograph: Alan Betson / The Irish Times

 

The rebound in Irish manufacturing fizzled out in August with companies reporting slower growth in output and new orders.

The latest AIB purchasing managers’ index (PMI) survey of Irish manufacturers highlighted what it described as “a loss of momentum as firms reported concerns around the wider economy in the wake of the ongoing coronavirus pandemic”.

The loss of momentum in August is not surprising given the pick-up in new coronavirus cases over the past month

The headline index fell back to 52.3 in August, down from July’s 23-month peak of 57.3. Scores below 50 signify contraction.

Growth rates for output and new orders eased sharply from July, while there were renewed cuts to employment and purchasing, the report noted.

“The loss of momentum in August is not surprising given the pick-up in new coronavirus cases over the past month, both in Ireland and elsewhere, and the continuing very uncertain economic outlook,” said Oliver Mangan, AIB’s chief economist.

The five-point drop in the headline figure was the fourth-largest on record, behind those registered in March (-6.1) and April (-9.1). That said, the latest reading was above the trend level of 51.8 since the survey was first compiled in May 1998.

The sub-index for new orders rose for the third consecutive month in August, following a severe downturn in March through to May as the economy was locked down to contain the spread of Covid-19. The rate of expansion in the latest period was the second-strongest since March 2019, but slowed markedly from July.

New export orders showed a similar trend, rising for the third straight month but at a much slower rate than in July.

Manufacturing output rose for the third month running in August, the longest sequence of sustained growth in 16 months.

The rate of expansion was strong in the context of historical data, but slowed notably from July’s near-record pace, the report noted.

AIB said manufacturers remained confident of growth in output over the next 12 months in August, with positive sentiment maintained for the fourth straight month.

However, it said there was still considerable uncertainty about a second wave of the virus and the possible impact on the economy and jobs.

“The details of the August survey point to considerable caution in the sector amid much uncertainty about the economic outlook,” Mr Mangan said.

“Output continued to grow at a strong pace as more markets reopen, though not as rapidly as in July,” he said.

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