Output declining at record rate, says survey

MANUFACTURING ACTIVITY is contracting at a record rate, according to the index which measures the health of the sector here.

The NCB Purchasing Managers’ Index (PMI) survey for February shows an index of 33.2. The pace of decline is the steepest since data was first collected in May 1998.

Output contracted at a survey record rate in February, largely due to a reduction in new business, while production has now fallen in each of the past 12 months.

Brian Devine, economist at NCB Stockbrokers, said falling output requirements meant falling employment requirements. “Indeed the employment reading contracted at the fastest pace in the survey’s history,” he said.

Data for the PMI survey is collected from a panel of about 300 companies in the Republic’s manufacturing sector. The surveys are produced by Markit Economics. A figure below 50 indicates a contraction and above 50 means growth.

Purchasing activity also declined at a series record pace, with 53 per cent of respondents recording lower input buying. Pre-production inventories have fallen at the steepest pace in the survey’s history.

According to the survey, input prices fell substantially due to the relative strength of the euro against sterling, pressures on suppliers to reduce prices and a drop in the global price of oil.

“The global collapse in trade is evident in the February PMI figures with the export order component falling eight points to post a new record low,” Mr Devine said.

“The outlook for Irish exporters was always going to be challenging in 2009 as the UK, US and euro zone all pared back their imports but the recent woes in eastern European economies has added to the contraction in Irish export orders. From a growth accounting perspective the fall in imports will be larger than the fall in exports thus providing a positive contribution to GDP.”

He said this would be of little help to the jobs market, however. The downturn led to a further decline in new orders, the survey found.

The latest contraction was the second steepest in the series' history.