January production falls drastically

By Geoff Percival

Tuesday, February 02, 2010

JANUARY saw the sharpest fall in production levels among manufacturing firms for five months, as the bad weather hit production and new business orders deteriorated.

The monthly Purchasing Managers Index (PMI) for the manufacturing sector, published by NCB Stockbrokers, fell from 48.8 points in December to 48.1 as of the end of last month. Any measure below 50 points marks an industry in decline.

Production output has now been down in every month since March of last year – a marginal increase last November proving to be a once-off bounce.

Output levels – down by their sharpest pace since last August – were hit by falling demand and the harshest winter weather conditions seen here for some years. Last month’s Arctic weather spell impacted negatively on output, supplier performance and new business orders as many routes became impassable.

However, the index’s authors said it is too early to say how much of the poor reading in January can be put down to the inclement weather.

"The adverse weather conditions, which prevailed in early January, caused havoc with businesses on both the supply and demand front," commented NCB Stockbrokers’ economist, Brian Devine.

"Consequently, it is difficult to decipher whether the fall in demand was solely due to the weather or simply that demand continues to remain weak. New orders fell marginally below the 50 mark but export orders continued to improve and reached their highest level – at 53.5 – since October 2007," he added.

New business levels, among respondent companies, were down for the first time in three months during January. Although the decline was said to be marginal, the fall was attributed to client companies being reluctant to commit to new projects.

"The rate of decline in purchasing activity quickened in January to the to the fastest in four months. The fall was partly in response to lower workloads, as well as expectations of further declines in new orders over the coming months," the latest PMI added.

In addition, the January data showed that input costs rose for the first time in 15 months on the back of rising commodity prices, while competition kept output prices in decline.

This story appeared in the printed version of the Irish Examiner Tuesday, February 02, 2010