Manufacturing sector continues to contract, amid drop in new orders
Business conditions in the manufacturing sector continued to deteriorate in July, new figures show.
The latest Purchasing Managers Index from AIB reveals the sharpest decline in new orders so far this year.
The index dropped slightly to 47, from 47.3 in June and 47.5 in May.
Readings above 50 indicate overall growth in activity.
The contraction in Irish manufacturing activity is in line with the trend in most other economies, amid a global downturn in the sector, especially in Europe.
The flash July Manufacturing PMIs for the euro zone and UK slipped further to 42.7 and 45,
respectively, while in the US, the index picked up to 49.
Oliver Mangan, AIB’s Chief Economist, said Irish manufacturing continues to be weighed down by muted customer demand.
“This was reflected in new orders falling for a fifth month in-a-row and at their quickest pace to date in 2023,” he said.
“This weakness in orders meant that production continued to decline at one the sharpest rates in the survey’s history.
“Official CSO data also show a steep fall in Irish manufacturing output so far this year,” he added.
Amid the lower level of production, Mr Mangan said firms continued to scale back their purchases of inputs, with spare capacity still on the rise as backlogs of outstanding work maintained their marked downward trend.
Meanwhile, stocks of finished goods showed a marginal rise.
On a more encouraging note, employment in manufacturing increased, while firms maintained their positive outlook for the year ahead.
Anecdotal evidence suggested that positive growth assessments were mainly underpinned by hopes for a pick-up in market demand.
The degree of confidence, however, slipped slightly from that seen in June and remained historically subdued.
The weakness in activity resulted in a further easing in inflationary pressures.
“Input prices fell for the fourth consecutive month, driven by falling raw material prices and lower supplier charges,” Mr Mangan said.
“The drop in input costs saw factory gate prices decline again for the third month in a row,” he added.