Second month of weaker growth due to declining export demand

Declining export demand has resulted in a second consecutive month of weaker growth in the Republic's manufacturing sector, according to the latest NCB Purchasing Managers' Index.

The seasonally-adjusted index shows that foreign demand for Irish-manufactured goods fell in August for the first time since last December, registering a rate of just 47.9.

A rate below 50 signals an decrease in activity compared to the previous month.

While purchasing managers reported fuller order books for the eighth month running, the rate of this growth also declined, falling from a high of 56.7 in June to 51.5 in August, the weakest level recorded since February.

Participating companies cited a fall-off in foreign demand as the main contributor to the trend, with most blaming this on doubts about the strength of a global economic recovery.

The index suggests that manufacturers have reacted to this perceived lack of confidence by slightly reducing the quantity of raw materials purchased in August, the first such curtailment in four months.

Moreover, average input costs are shown to have risen sharply, registering 58.8 on the index, the second-highest rate since the end of 2000.

NCB senior economist, Mr Eunan King, said that it was difficult to quantify how much of a constraint it would be in coming months, but conceded that the fall-off in raw materials purchases was "not a great sign".

"It fits with the picture of a recovery that's not very dynamic," said Mr King.

The index shows that production levels, while registering an eighth consecutive month of growth, expanded at their lowest rate since March, falling from 54.7 in July to 52.2 in August.

Stocks of finished goods meanwhile, continued to contract, with the series declining from 48.4 in July to 47.1 in August.

Despite the dampening factors, the overall August index remains indicative of an expanding manufacturing sector.

The index stayed in positive territory for the seventh consecutive month, albeit at a lower level, registering 51.3, down from 53.6 in July and 54.5 in June.

Mr King said that the index was mirroring similar trends seen across Europe.

While the overall picture was "not very robust", Mr King said that positive consumer data from the US offered some reason for optimism.

He highlighted continuing marginal growth in employment levels in the Republic's manufacturing sector, which registered 50.6 in August compared to 51.7 in July.

Declining export demand would not necessarily translate into lower employment levels, Mr King said, since most export-led industries were not labour-intensive.

Most companies contributing to the index reported steadiness in staff levels over the month.