‘Worrying’ slowdown in orders

A SLOWDOWN in orders saw manufacturing firms cutting jobs last month as activity slowed not just in Ireland but worldwide.

The study showing that growth in the Irish manufacturing sector slowed last month was described as “worrying” by NCB economist Brian Devine.

The NCB Purchasing Managers Index (PMI) fell from 56 in April to 51.8 last month, which was the weakest figure since November last year.

Higher oil and steel costs meant the price of raw materials rose sharply, resulting in companies raising the prices for goods.

The report said the Irish manufacturing sector lost momentum in May, with growth rates of both output and new orders slowing “markedly”.

On a more positive note, export orders continued to expand strongly.

The employment index dipped below the 50 mark, which signals growth, to 49.9. Employment levels fell for the first time since November as firms cut staff numbers in response to the slowdown in orders.

“Industrial output was down 0.45% quarter on quarter in quarter one, driven by underperformance in a few specific sectors. It is thus worrying that the PMI is dipping towards 50 once again, suggesting that the pace of activity in the manufacturing sector generally is slowing,” said Mr Devine.

The report also found that the rise in new business was much weaker than that seen for new export orders.

New business from abroad increased for the 18th time in the past 19 months and at a substantial pace. The rate of expansion in manufacturing output fell to 52.6 in May from 58.7 in April.

Meanwhile, British manufacturing grew at the slowest pace in almost two years in May as weak domestic demand led to a drop in production and new orders, a survey showed.

A gauge based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply declined to 52.1, the lowest since September 2009, from a downwardly revised 54.4 in April.

Output and new orders fell for the first time since the middle of 2009, and producers of consumer goods and smaller manufacturers were hit hardest.

Factory growth eased in Europe and Asia in May, feeding concerns that the world’s main economic engines are cooling fast as richer countries curtail orders.

Purchasing managers indexes (PMI), measuring the activities of thousands of factories across the world, sank to multi-month lows in China and Europe, where even France and Germany showed fresh signs of sagging.

The surveys for South Korea, India and Taiwan also showed the pace of factory activity easing. Some slackening was expected due to the quake and tsunami in Japan.