Euro set to boost Irish manufacturing plants in 2016

The sustained weakness of the euro looks set to boost Irish manufacturing again in 2016 even though there was some mixed news about the prospects for the UK — Ireland’s largest market.

The year-long slump in the euro against sterling and the dollar has provided a remarkable boost to even the smallest of Irish exporters because it makes selling into Britain and the US so cheap.

And the monthly Investec purchasing’ managers index published yesterday brought new hope the currency boost will continue to pay out for exporters, with new export orders having grown “substantially” in December’s survey.

The prices manufacturers paid for raw materials fell again last month, as lower commodity cost offset the effects of the weaker euro.

“A key highlight of today’s report is the new orders segment, where the rate of expansion quickened to its fastest pace since July,” said Philip O’Sullivan, chief economist at Investec Ireland, which helps conduct the survey.

“Some panellists reported their clients had made advance orders for 2016.

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"The new exports orders segment points to substantial growth in overseas demand, with respondents attributing some of this to euro weakness,” he said.

The survey’s new orders index extended its winning streak to 30 months.

Because the survey suggests strong demand is still building at Irish factories from home and abroad, Mr O’Sullivan said he believes a slowdown in the pace manufacturers hired last month was likely to be temporary.

The employment sub-index showed manufacturers continued to hire in December, but at the slowest pace since August 2013.

Overall, the PMI posted a reading of 54.2, the strongest since August’s 56.7.

A reading above 50 shows manufacturing is expanding, while a reading below 50 show the sector is contracting.

UK manufacturing however unexpectedly cooled in December, suggesting it made little contribution to the economy there in the final quarter of 2015.

Markit Economics in London said the factory index fell to a three-month low of 51.9 from a revised 52.5 in November.

Economists had forecast an increase to 52.8 from an initially reported 52.7.

The weaker UK purchasing managers index followed a report from China showing that manufacturing there shrank for a fifth month in December.