Sterling weakness and a decline in global demand contributed to a fall in new orders for the Irish manufacturing sector, which declined for the 14th consecutive month in January.
The NCB Purchasing Managers' Index (PMI) - which measures manufacturing activity – stood at 38.9 last month, marginally higher than the reading of 37.9 in December, but still the third steepest decline activity since the survey began in May 1998.
Any reading below 50 marks contraction and the lower the number, the faster the pace of decline.
“Anecdotal evidence suggested that the global economic downturn was the principal cause of the (export) reduction, while there were reports that the relative strength of the euro compared with sterling had led to a fall in demand from the UK,” Markit, which compiles the survey, said in a statement.
A second implication of sterling weakness was that it contributed to depressed import costs while input prices fell at the fastest pace on record, dropping to 41.3 in January from December's 44.7.
Around 36 per cent of survey respondents said they cut jobs last month and just 9 per cent said they had increased employment, as firms adapt to lower output requirements.
The index of employment stood at 36.8 in January, marginally higher than the series low of 36.3 recorded in December.
Output prices fell for the second month in a row and at the fastest pace since charges data were first collected in September 2002.
Brian Devine, chief economist at NCB stockbrokers, said more than 47 per cent of respondents had signalled less input buying with just 17 per cent indicating a rise.
“The wider economic downturn led to a further sharp reduction in new business over the month, while poor global economic conditions were largely behind the latest substantial fall in new export orders. There were also reports that the relative strength of the euro compared with the pound had led to less new business from the UK.”
The volume of new orders also contracted in January as companies remained cautious about purchasing decisions. Despite easing for the second month in a row, the index of new orders stood at 37.5 last month.
The Central Bank has forecast growth will contract by 4 per cent this year after the economy slipped into recession in 2008 for the first time in a quarter of a century.
Ratings agencies Moody's and Standard & Poor's have both warned Ireland is at risk of losing its AAA credit status if its budget position deteriorates further.
Additional reporting Reuters
