Irish factories hit by Brexit and trade wars

Brexit and the global trade wars continue to pile on the pressure as Irish factories cut their output in September for the fourth month in a row and halted recruitment of new staff.

Irish factories hit by Brexit and trade wars

Brexit and the global trade wars continue to pile on the pressure as Irish factories cut their output in September for the fourth month in a row and halted recruitment of new staff.

Confidence about the outlook for Irish manufacturing remained positive but was the weakest level since the surveys began seven years ago, according to the AIB Manufacturing Purchasing Managers’ Index (PMI).

The survey is one of many similar surveys around the world that are seen as authoritative in tracking a major part of the global economy. The Irish survey, in particular, is closely watched because the many multinationals based here are making goods for world markets and therefore reflect worldwide demand that has been dampened by the US-China trade wars.

The uncertainties over Brexit are also weighing on Irish-owned factories such as food plants which rely on Britain for their export sales. The survey’s overall PMI reading of 48.7 in September compared with August’s reading of 48.6. Any number under 50 means manufacturing is contracting.

World trade fears and Brexit have weighed on output for the fourth successive month, amid weaker sales to the UK, according to the survey.

“The weak Irish data of recent months clearly show that the sharp slowdown in global manufacturing over the past year or more is being felt in Ireland also. Brexit uncertainty is an additional negative factor weighing on activity here,” said Oliver Mangan, chief economist at AIB.

Reflecting the weak global demand outlook, the price of crude oil headed for its weakest quarter since late last year.

The price of Brent crude has slumped about 8% since the end of June after a brief spike earlier this month due to drone strikes on the Abqaiq processing facility and Khurais oil field in Saudi Arabia.

The Saudis are restoring supply quicker than expected, and the subsequent sell-off underscores investors’ focus on weakening oil demand from slower economic growth and the US-China trade war.

Elsewhere, US stocks advanced as investors weighed the latest turns in the trade war as the Trump administration partially refuted a report it would target Chinese capital, reversing losses sparked by the news last week.

Sterling rose to 88.67p as investors assessed that British prime minister Boris Johnson would, after all, strike some sort of Brexit deal with the EU.

In Ireland, shares in AIB and Bank of Ireland gained. The Irish banks have been among the worst hit in the past year by fears over Brexit.

In Britain, household spending helped limit the damage to Britain’s economy as it shrank in the second quarter ahead of Brexit, according to new data that also showed their financial health was less fragile than previously thought.

The UK’s Office for National Statistics confirmed the economy contracted at a quarterly rate of 0.2% in the second quarter, a hangover from a stockpiling boom before the original Brexit deadline that was postponed until the end of October.

While British industry and investment wilted in the escalating Brexit crisis, household spending increased at a quarterly rate of 0.4%, marking the fastest growth in a year.

“A healthier picture of households’ balance sheets gives us some confidence that household spending will continue to underpin growth,” said Andrew Wishart of consultancy Capital Economics.

Additional reporting Bloomberg and Reuters

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