Irish factories boost output

The outlook for output and jobs at Irish manufacturers looks rosy, with demand in the UK and in the rest of the world likely to drive demand in factories through the rest of the year, a major survey of purchasing managers has revealed.

The Investec Purchasing Managers’ Index (PMI) found that the surge in sterling after the Westminster election delivered a huge boost to Irish exporters last month that helped drive output from factories to a nine-month high.

The benefit of a weak euro against sterling for Irish manufacturers is unlikely to fade any time soon, economists predict.

The Investec PMI jumped to 57.1 in May from a reading of 55.8 in April, and recorded its highest level since August 2014. With any reading above 50 signifying expansion across manufacturing as a whole, the strong PMI readings have now stretched for two years and have accurately predicted turning points and blips in the Irish economic recovery story in the past.

“There are two things that give us confidence about the outlook,” said Philip O’Sullivan, chief economist at Investec Ireland.

“The employment index was up and the quantity of purchase index by Irish-based manufacturers increased. They are reassuring signs of further growth for the rest of the year.”

The quantity of purchase sub-index reached its highest level since February 2011, while the employment sub-index showed that manufacturing firms were hiring in May at a slightly faster pace than in recent months.

At 52.2, a separate PMI reading by Markit Economics showed only a modest expansion for manufacturing across the whole of the eurozone in May, possibly because of the ongoing drama involving the Greek debt talks.

The strong readings for Irish manufacturers may suggest that the ECB’s measures to boost sovereign bonds is also keeping a lid on the euro.

Ahead of the UK general election, sterling last month had traded at 74c against the euro and is currently trading around 72c.

Mr O’Sullivan said that the survey however showed that manufacturers were also benefiting from US demand, which suggests that the sector can look with some confidence to higher demand beyond the UK.

“It is not just a sterling story,” he said.