Factory production growth falls to 15 month low in May
Factory production growth dropped to 15-month low in May, as higher prices reportedly dampened client demand.
The latest AIB IHS Markit manufacturing Purchasing Managers’ Index (PMI) slipped to 56.4 in May, down from 59.1 in April.
Any figure greater than 50 signals overall improvement of the sector, with the May figure indicating an improvement in manufacturing conditions for the twentieth month running.
The fall was in line with the trend seen in other economies – the flash May indices fell to 54.4 and 54.6 in the Eurozone and UK, respectively.
“The easing in the pace of expansion reflects slower growth in output and particularly new orders, with some respondents saying that rising prices are weighing on demand,” said Oliver Mangan, AIB Chief Economist.
Quicker rises in employment and stocks of purchases meanwhile had small positive impacts on the headline figure.
“Continuing pressure on workloads saw employment increase markedly at the fourth-quickest pace on record,” Mr Mangan said.
With order growth slowing, backlogs of work at manufacturing firms declined for the first time in over a year.
“The fall in stocks of finished goods was only marginal and the slowest since last September, while inventories of inputs rose at their fastest pace in four months,” Mr Mangan said.
“Firms also reported that, although delivery times for input supplies continued to lengthen appreciably, it was the least pronounced rise since December 2020,” he added.
Looking ahead, business confidence weakened to a 19-month low in May, with the war in Ukraine and steep inflationary pressures reportedly weighing on sentiment.
“In this regard, input prices rose at their second-fastest pace on record, with marked increases in raw materials, energy and fuel costs,” Mr Mangan said.
“Faced with surging input prices, manufacturers raised their own prices by a survey-record degree for a third successive month,” he added.