Rising energy and raw material costs being passed on to consumers

Rising energy and raw material costs are forcing most manufacturers to continue increasing their own prices, a new survey shows.

Oliver Mangan, AIB chief economist, says that inflationary pressures on manfacturers remain intense. Eight out of 10 companies that responded to the bank's latest purchasing managers' index (PMI) reported that they were facing fuel, raw material and energy costs.

“Faced with surging input prices, manufacturers raised their own prices by a survey-record degree for a second successive month,” he said.

The prices of goods made in the Republic have risen every month since October 2020, according to the AIB PMI for April.

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The index shows the sector is growing and hiring increasing numbers of workers.

Overall, the PMI hit 59.1 in April. Any reading above 50 indicates growth on the previous month, while any result below that means that manufacturing contracted.

Last month’s growth prompted manufacturers to hire new workers at the fastest rate since last June, when the Government first began easing tough Covid-19 restrictions.

Mr Mangan says the survey shows continued strong growth in the industry, a trend that has been running for more than a year.

“The Irish data for April paints a very similar picture to March, with strong growth in orders, output and employment, but less confidence on the outlook for business activity and continuing very elevated inflationary pressures,” he adds.

The economist noted that employment registered it biggest rise for 10 months, while backlogs of unfinished work continued to grow.

However, inflation and uncertainty slowed new orders and output slightly, as rising prices weighed on demand.

“Firms also reported a further lengthening in delivery times for supplies owing to multiple factors, including raw material and labour shortages as well as ongoing transport delays,” Mr Mangan notes.

Sentiment remained positive, but fell to its lowest level since the end of 2020 as manufacturers grew increasingly concerned about inflation and the impact of the ongoing Ukrainian conflict.

The survey also found that labour shortages and high prices had slowed the pace of growth during April. Last month’s index trailed March’s reading of 59.4, but was in line with the year so far.

Mr Mangan noted that the Irish PMI was higher than similar indexes in the eurozone and UK, both of which read 55.3 for April.