Manufacturing sector turns a corner

May saw a rebound in fortunes for Ireland’s manufacturing sector, with new business orders rising for the fourth consecutive month.

The latest monthly purchasing managers’ index (PMI) for the sector, published yesterday by NCB Stockbrokers, showed a reading of 51.2. While the index had already been above the neutral 50 point mark, which separates a sector in growth mode from one in decline, the PMI had slipped from 51.5 points in March to 50.1 points in April — a move which had represented its first fall in three months.

The growth in new orders was mainly linked, in May, to a rise in export orders, particularly outside of the eurozone.

Rising orders also led to an increase in production (on the up, now, for three of the past four months); while output was up slightly — following April’s reduction.

The rise in workloads also led to companies increasing their employee numbers, something seen as being the most surprising element of the latest index by NCB’s chief economist, Brian Devine.

“The most surprising aspect of the report was the fact that the employment index expanded for the third month in a row, signifying that more firms expanded employment than cut employment,” he said. “There was a 2.4% quarter-by-quarter increase in industrial employment in the fourth quarter of last year, according to the official CSO labour statistics. The evidence from the PMIs would suggest this trend has continued into the first quarter of this year,” Mr Devine added.

Furthermore, the rate of employment increases within the manufacturing sector, during May, was at its sharpest for 14 months.

The latest survey also showed that strong competition among firms largely prevented from passing on increased costs to clients and, as a result, prices charged were reduced fractionally.