Manufacturing sector gathers pace as economy shows further improvement

BUSINESS conditions continued to improve for Irish manufacturers last month.

The monthly Purchasing Managers' Index (PMI), which is compiled by stockbrokers NCB, found the rate of improvement in business confidence was higher than the previous month.

The monthly index rose to 54.4, up from 53.7 and comfortably ahead of the key 50.0 mark, which represents the difference between positive and negative sentiment, for the seventh month in a row.

NCB chief economist Dermot O'Brien said the recovery in Irish manufacturing was gathering pace and employment growth was becoming more established. He also said the economy was benefiting from greater buoyancy in demand both in Ireland and abroad.

Purchasing managers recorded an increase in new orders and said there was a solid increase in exports to international clients, especially to customers in Asia and North America.

Firms surveyed also noticed an increase in lead times between ordering some raw materials and having them delivered, due to shortages in certain areas.

This caused input prices to go up as suppliers were able to charge customers more for delivering goods that were in short supply.

Output prices only saw a slight rise as competition between firms remained intense and took away manufacturers' ability to raise prices and pass on higher input costs.

The volume of inputs bought by purchasing managers also rose sharply as businesses needed more raw materials to match increased production requirements.

But stocks only rose marginally as managers continued to buy goods on a "just-in-time" basis and bought enough to satisfy immediate demands.

The number of manufacturing jobs saw a slight increase as businesses took on more staff to meet increasing workloads.

Backlogs of work in progress were unchanged despite extra staff, but this was seen as positive after declining every month since September 2002.