Drop in manufacturing as orders fall

THE fall in Irish manufacturing in June was almost four times greater than the European average and in sharp contrast with our largest trading partner, Britain, where manufacturing grew.

The NCB Purchasing Managers' Index (PMI), which was conducted by NTC Research, shows the index dropped to 45.7, from 47.5 in May.

A figure below 50 indicates a contraction, and the rate of deterioration in June was the fastest since the survey began in May 1998.

NCB senior economist Eunan King said: "the manufacturing sector appears to be under increasing pressure as output, orders and output prices fall.

"Weak external demand and currency strength are cited as the main problems. The only offsetting factor was a sharp fall in input costs as the currency rose and oil price reductions fed through."

The survey shows downturn in manufacturing business conditions was driven by a decline in the level of new business in June which fell for the ninth successive month.

The rate of decline of order books was the fastest since October 2001.

"The current strength of the euro against the US dollar, which reduced many import costs, along with lower oil prices, were frequently cited by firms as the principal factors behind a decline in input costs for the second month in a row in June.

Moreover, the rate of deflation was the fastest since September 1998.

Meanwhile, in an attempt to stimulate increased demand and in response to intense competition, heightened as a result of the euro's strength, companies cut their prices charged for the third successive month in June," the survey authors said.

The index also showed the overall size of the manufacturing workforce was pared back for the 10th month running in June, as companies attempted to reduce staffing levels.

Companies surveyed also generally attributed fewer total new orders to weaker demand, particularly from export markets which, when considered separately, showed that new export orders declined for the 11th consecutive month and at the fastest rate since October 2001.

European manufacturing shrank in June, the ninth contraction in 10 months, as the stagnation of the region's $8 trillion economy discouraged businesses from boosting production and investing in new machinery.

British manufacturing activity rose for a third month in June on higher production and orders, suggesting that an economic recovery in Europe's second-biggest economy may be taking root.

An index measuring activity in industry climbed to 49.2 last month from 48.3 in May.