The latest Investec Manufacturing Purchasing Managers’ Index for Ireland found that industry here expanded at a modest rate in October, while “anecdotal evidence highlighted falling new orders from UK clients following the decision to the leave the UK and the subsequent depreciation of sterling against the euro”.
And the survey highlighted a new risk after a roller-coaster year for Irish exporting firms from the uncertain outlook of the tightening race for the White House between Hillary Clinton and Donald Trump, with less than a week to the November 8 vote.
“We previously spoke of well-founded caution on the part of Irish manufacturers as we head into the year-end,” said Philip O’Sullivan, chief economist at Investec Ireland.
“October’s modest improvement is not enough to make us change that assessment, not least given next week’s US elections, which could have a significant impact on the health of the sector, as circa 22% of Irish merchandise exports go to the US.”
The overall health of Irish companies making consumer goods, goods for exports and investment goods, improved only slightly last month, according to the survey.
Export orders growth last month “was only slight as panelists reported that sterling weakness made securing new work in the UK more difficult”.
Sterling’s 15% slide from 76p against the euro since the UK voted on June 23 to quit the EU makes it very tough for small and large firms here to sell into Britain because their business costs are priced in euro.
Their problems are probably worse again because sterling started to fall before the Brexit vote, and is down over 20% to the euro since late November a year ago.
“New business from abroad increased for the second month in a row during October, although the rise was only marginal and weaker than that seen in the previous month,” the survey found.
There was better news for new order books overall, which include orders for all products, including goods destined for the home market, which showed a third monthly rise, driven by “signs of improving client demand”.
The survey reported increases in consumer goods, while orders for investment goods declined.
The Government which pared its economic outlook following the Brexit vote is relying on the recovery being driven from a growth in consumer spending, while the hectic expansion in exports which drove the upturn since 2013 has slowed considerably.
The Government now sees GDP growing this year by 4.2% and by 3.5% in 2017.
The overall measure of the health of manufacturing which includes output, backlogs of work and employment intentions, expanded, although at a reading of 52.1 in October, where 50 marks the difference between contraction and expansion, was “modest”, the Investec survey found.
Employment plans were a bright spot, as “all three monitored groups recorded a rise in employment, led by consumer goods producers”.