Manufacturing recovery continues

Ireland’s manufacturing sector has continued its recovery, with September representing the fifth consecutive monthly increase in production levels and business conditions.

The actual rate of expansion in the sector last month was marginal, but was still more rapid than in August.

On top of that, September saw the level of new business orders for companies rise for the eighth straight month. That statistic is seen as being a key factor behind a seventh successive monthly increase in employment levels in the sector.

“On the pricing side, the big pick-up in output prices — the highest reading from that indicator since Apr 2011 — points to firms being able to offset at least some of the pressure from input prices, which has been driven by higher commodity prices,” said Philip O’Sullivan, chief economist with NCB Stockbrokers.

Input prices rose for the second month in a row in September and at an accelerated pace than seen in August. Higher raw material and commodity prices were the main reasons, with oil prices a particular problem.

The latest data for the sector comes from NCB’s monthly purchasing managers’ index, which registered a 51.8-point reading for September — up from 50.9 in August, and well above the neutral 50-point mark which separates a sector in growth mode from one in decline.

Mr O’Sullivan said: “Higher workloads encouraged firms to take on extra staff during September. The rate of job creation was solid, and the fastest in three months.”

However, he warned of the effects of falls in new export orders, which dipped slightly last month amid weak demand in overseas markets.

“One area of concern is new export orders, which fell below the 50-point mark for the first time in seven months. This is likely to be driven to some extent by the well-documented challenges facing many of Ireland’s key trading partners,” he said.

Last month’s rise in new order levels was attributed to companies acquiring new clients rather than receiving increased orders from existing customers. The higher workloads then prompted the increase in staff.

Manufacturers’ purchasing activity was broadly unchanged in September. NCB reported that firms were reluctant to build up inventories of stock.