Output slips amid fragile conditions, says NCB

IRELAND’S MANUFACTURING output declined in December, as the economy remained fragile, according to new data released yesterday. The overall NCB manufacturing purchasing managers’ index (PMI), a barometer of activity in the sector, was unchanged during the month. At 48.8, the index remains below the 50 mark that separates growth from contraction.

Output at Irish manufacturing firms contracted marginally in December. However, new orders, driven by new export orders, showed further “tentative” signs of improvement, expanding for the second month in a row.

The increase in export orders reflects the growing momentum in global economic activity. Manufacturing activity in the euro zone expanded at its fastest rate in 21 months in December, although the growth in new orders across the area slowed slightly, a separate survey showed yesterday.

The Markit Eurozone Manufacturing Purchasing Managers’ Index for December rose to 51.6 from 51.2 in November, its highest level since March 2008.

Manufacturing activity has now expanded in the euro zone for three consecutive months. The strongest gains in new orders were reported in France and Germany.

Markit said investment and consumer goods production across the euro zone accelerated in December, while production of intermediate goods slowed.

Overall manufacturing activity in Germany expanded at its fastest pace since May 2008, although slower than previously expected, while France and Italy also saw activity tick up from November.

But it was a different story in Spain, where manufacturing has contracted for over two years and did so at a faster pace last month than in November. Spain also experienced the sharpest rate of order book contraction in the euro zone, Markit said. Spain and Britain were the only two major western economies that did not grow in the third quarter of 2009.

Unemployment remains a concern for the European economy. The factory employment index showed the 19th straight month of job losses, although at a slower pace than in November and the mildest rate in 15 months. In Ireland, employment continued to weigh on the PMI index, with employee numbers falling for the 25th month in a row, albeit at the slowest rate since May 2008.

NCB analyst Brian Devine called employment “a major drag” on the index and said there was a structural element and a cyclical component to the loss of manufacturing employment in Ireland.

“The challenge ... is to create vigorous growth in services employment, as this is what will be needed to drive a sustained improvement in economic conditions,” Mr Devine said.– (Additional reporting, Reuters)