Increase in manufacturing output fails to dispel fears

The economy is showing further signs of stabilisation with manufacturing output continuing its positive momentum.

Irish manufacturing output for the month of July was up 6.4% compared with Jul 2011, according to the latest figures released by the CSO.

Production was up 1.2% compared with June levels, while manufacturing output increased by 4.4% for the three months of May, June and July compared with the previous three months.

The hi-tech and chemical sectors saw a decrease of 0.4% between June and July, whereas the more traditional sectors grew by 1.3% over the same period.

But the good run in manufacturing output may be coming to an end, according to Merrion Stockbrokers economist Alan McQuaid.

“Given the unfavourable global economic backdrop, especially in the eurozone and UK, the worry is that overall production will weaken sharply, which doesn’t augur well for the prospects of Irish exports, an integral part of Ireland’s economic recovery hopes, in the short term,” said Mr McQuaid.

“That said, industrial production can be quite volatile at the best of times, particularly in relation to the chemicals sector, which accounts for around 60% of Irish merchandise exports.”

However, Ireland’s strong position in “recession hardy” exports should see the economy performing better than its peers for as long as the global economy remains in a slump.

“Whatever about the short term, when the world economy regains momentum, Ireland is better placed than most to take advantage of that.

“Still, as things currently stand, the Irish manufacturing sector is on course to post an overall increase in output for the third year running in 2012, with a rise of around 3.0% projected,” added Mr McQuaid.

There was further good news on the economic front with the release of the NCB Stockbrokers’ Purchasing Managers Index (PMI), which showed that manufacturing output continued to rise in August compared with July, though the pace of growth had moderated compared to previous months.

The NCB PMI for August recorded a level of 50.9 compared with 53.9 in July. Anything over 50 shows that the manufacturing sector is expanding. The index is compiled through a survey of purchasing managers.

The survey found that there were marginal increases in output, new orders and employment in August compared with the previous month.

However, input costs rose for the first time in three months, though firms continued to lower their prices charged.