Manufacturing sector in growth mode

AN increase in new business levels kept Ireland’s combined manufacturing sector in growth mode during August, but the sector’s actual rate of growth slowed to its weakest level for five months.

The latest monthly purchasing managers’ index (PMI) for the manufacturing index – published by NCB Stockbrokers – measured 51.1 points in August. While still above the 50 point mark (above which any score rates as growth), it was down from 51.4 in July. It has now dropped by nearly 3 points since May.

But, although last month only saw a slight improvement in business conditions, operating conditions – amongst manufacturing firms – have now actually 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,” according to the latest index.

It added: “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.”

There was less welcome news on the jobs front, with employment levels across the sector falling for the third consecutive month in August. Those leaving positions were not replaced, as companies continued to try to limit operational costs.

“Staffing levels decreased at a solid pace that was the fastest since March,” NCB’s commentary said.

Costs continued to be an issue last month, with the latest PMI data pointing to a further steep increase in input costs, “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,” according to NCB.

Purchasing activity, amongst firms, also continued to rise last month – although the latest increase was “only slight” and “the weakest in the current sequence of growth”.

Meanwhile, latest data from the US, also released yesterday, showed that the manufacturing sector there unexpectedly picked up its pace of growth in August and has now increased for 13 consecutive months.

August’s US index reading of 56.3 points was up from 55.5 in July and employment within the sector reached its highest level for 27 years.