‘Signs of optimism’ in manufacturing

A DEGREE of confidence is returning to Ireland’s manufacturing sectors, though in small doses, according to a new report.

Backing up positive new monthly industrial production figures from the CSO, yesterday’s summer 2009 Business Outlook Survey from KPMG said while sentiment is still weak, there are signs of rising optimism.

“Irish business has particular concerns about profitability and weak domestic demand and it’s difficult to see this changing in the short term.

“This report highlights the continuing difficulties faced by Irish manufacturing – however, there are some slight rays of hope in that a small majority of respondents see planned levels of business activity rising,” according to Roger Gillespie, KPMG’s head of consumer and industrial markets in Ireland.

The KPMG survey questioned nearly 4,000 manufacturing companies across the EU, including Ireland. Its business sentiment measure for Ireland measured +7.8; up from a -16.7 in the last survey six months ago.

Ireland is currently 8th of 12 countries measured – behind the likes of France, Germany, Italy and Britain but above Spain, Holland, the Czech Republic and Greece.

Monthly industrial production and turnover figures from the CSO yesterday, showed manufacturing production grew by 4.3%, year- on-year in June and by 10.2% on a month-by- month basis. This follows on from a 4.3% year-on-year drop recorded in May.

June’s production increase was driven by a 35% rise in pharmaceutical production and a 16% increase in the “modern” sector which includes high-tech and chemical production.

However, chief economist at National Irish Bank, Ronnie O’Toole, said the modern sector is dominated by foreign multinationals and growth figures mask the ongoing difficulties of indigenous Irish firms.

He said: “Output from the traditional sector (dominated by Irish firms many of whom supply to the construction sector) has now declined by one fifth in the space of two years.”

The CSO reported a 16% decrease in the traditional sector in June.

A total fall of between 2% and 3% is widely expected for manufacturing output here in 2009. Within that, production from indigenous companies is expected to fall by double digit percentages.