Falling employment and shrinking export orders contributed to a slower manufacturing sector in Ireland last month, a survey shows.
The NCB Purchasing Managers' Index (PMI) released today, which measures Irish manufacturing activity, fell to 51.9 in May from 53.3 in April, still keeping above the 50.0 mark separating growth from contraction.
While the overall PMI remained in positive territory, component indexes for employment and export orders were both well below the 50.0 mark, falling to 47.9 and 46.7 respectively from 50.7 and 48.6.
A rapid cooling in Ireland's property market and lower rates of construction mean economists are watching closely for signals that the slowdown is feeding through into the jobs market and the broader economy.
Despite record levels of immigration, Ireland has enjoyed full employment in recent years as a thriving economy generates tens of thousands of new jobs every year.
Irish economists have reined in predictions for economic growth in recent months, however.
A Reuters poll published on Thursday showed they had cut forecasts for 2007 gross domestic product (GDP) growth for the third month in a row to 5 percent from 5.3 percent in April's survey and the 5.6 predicted in February.
The PMI data showed the sharpest reduction in manufacturing employment since July 2003.
"It is of some concern...that the employment index indicates a decline in May," said Dermot O'Brien, Chief Economist at NCB. "This is the second negative reading in three months and comes after almost a year of solid growth."
The survey's compilers said those companies surveyed had reported efficiency improvements and overseas competition led to the reduction in employee numbers.
That was reflected in feedback on export orders which declined for the second month in a row and at the most marked pace since August 2003. Reports from firms suggested contracts had been lost to lower cost rivals in Asia and Eastern Europe.
Ireland's central bank has warned repeatedly that declining competitiveness is one of the biggest risks facing Ireland's economy. It also believes a sharp downturn in construction would have serious implications but has said it believes a soft-landing is the most likely scenario.