Business expansion slows from record high

Business conditions weakened slightly last month as the pace of new businesses slowed from the record highs seen in October.

The Investec Purchasing Managers’ Index (PMI) reported a headline figure of 52. The figure indicates that businesses are still growing but that the pace of that growth has fallen compared to October.

Chief economist with Investec Ireland Philip O’Sullivan said October had been a particularly strong month with the PMI reporting the highest headline figure in two-and-a-half years.

“In all, while most components, when benchmarked against the buoyant October outturn, point to a slower pace of expansion in November, the underlying narrative remains intact.

“The manufacturing sector in Ireland continues to grow and we see this trend extending in 2014 on the back of an improving international and domestic economic backdrop,” he said.

Key to Ireland’s economic recovery will be the ability to create jobs. The firms surveyed by Investec reported a solid rate of employment growth on the back of new orders. Out of the 285 industrial companies surveyed, 16% reported raising staffing levels, while only 6% of companies reported lower employment figures.

“Given Ireland’s elevated unemployment rate, a key component for us within this release is employment. This area posted further growth during November, albeit at a somewhat slower pace than in October, extending the current sequence of expansion to six months. This points to continued optimism on the future outlook from manufacturing firms in Ireland,” said Mr O’Sullivan.

An issue which has begun to trouble businesses has been the rise in input costs which has been forcing firms to increase their prices to protect margins. “On the pricing side, firms were able to raise output prices, albeit marginally, for a third successive month. This was chiefly attributed to upward pressure on input prices (which have increased for four months now), which is weighing on margins.”


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