Manufacturing growth slows in August

Employment in manufacturing has fallen for the third month in a row, according to NCB Stockbroker's Purchasing Managers' Index.

August data signalled that while operating conditions in the Irish manufacturing sector continued to

strengthen during the month, the rate of improvement eased further.

This was despite faster new business growth in August.

Output increased, but at a weaker pace, while the rate of job cuts accelerated.

The seasonally adjusted NCB Purchasing Managers’ Index (PMI) - an indicator designed

to provide a single figure measure of the health of the manufacturing industry - fell for the third month

running to 51.1 in August, from 51.4 in July, to register only a slight improvement in business conditions in the sector.

Employment continued to fall in August, extending the current period of job shedding to three

months as leavers were not replaced and firms attempted to limit costs.

Staffing levels decreased at a solid pace that was the fastest since March.

However, operating conditions have now strengthened in each of the past six months.

The rate of production growth eased again in August, and was only marginal, partly reflecting

recent weak new order expansions.

However, latest data pointed to a sharper increase in new business that was faster than the long-run series average.

A number of respondents mentioned higher new export orders as boosting overall new business.

New orders from abroad rose markedly, and at a faster pace than seen in July.

Despite continued new order growth, Irish manufacturers depleted outstanding business further

in August as part of attempts to reduce inventory levels.

Latest data pointed to a further steep increase in input costs at Irish manufacturers as a number of

raw materials were reported to have risen in price, particularly metals, paper and plastics. Although some firms were able to raise output prices in response, intense competition meant that the increase was only marginal.

Average vendor performance deteriorated to the greatest extent in the series history in August, as had been the case in the previous month.

The substantial lengthening of lead times reflected both commodity shortages, and insufficient capacity at suppliers.

Purchasing activity continued to rise, although the latest increase was only slight, and the weakest

in the current sequence of growth.

Despite higher input buying, stocks of purchases decreased for the thirty-third consecutive month.

Moreover, the rate of depletion was the strongest since November 2009.

Stocks of finished goods also fell sharply as deliveries increased.

The 28th consecutive monthly reduction in post-production inventories was the fastest since May 2009.

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