Irish factory cost inflation rises fastest in 23-year history of survey as output booms

Conditions are described as 'robust', despite surge in prices of energy and raw materials caused by supply chain bottlenecks

Irish manufacturers are passing on rapidly rising global costs of raw materials and hikes in energy costs, as factory output continues to boom, a new report reveals.

The latest AIB manufacturing purchasing managers’ index showed that input costs climbed at their fastest pace in October since the survey began 23 years ago.

The Irish Purchasing Managers’ Index, which is one of a huge number of similar purchasing surveys carried out on a monthly basis around the world, is closely watched because of the unusual mix of multinationals and Irish-owned factories in the survey.

Costs of energy and raw materials rising

October’s findings show that manufacturers are passing on the sharp increases in energy prices and raw material costs caused by the global supply bottlenecks, revealed by “the widespread pass-through of higher input prices to end products in October”.

“Anecdotal evidence linked higher costs to a wide range of raw materials, transport charges, gas prices, and Brexit-related issues,” according to the survey.

Irish manufacturing activity continued to boom, with the survey describing conditions as “robust”.

The latest overall index reading of 62.1 increased from September’s 60.3. Any reading above 50 means that output is expanding.

New orders from home and abroad posted increases, employment rose, and the future output index indicated that Irish manufacturers believe output will increase in the next 12 months.

Manufacturers tapping increased demand

Oliver Mangan, chief economist at AIB, said that manufacturers were tapping increased levels of demand while working through backlogs caused by the Covid restrictions around the world.

“However, capacity constraints remained evident in the sector,” Mr Mangan said.

“For an eighth successive month, the backlog of work rose, with firms attributing the higher levels of incomplete work to supply delays and staff absences.

“This combination of supply delays and higher energy prices brought further upward pressure on both input and output prices.

“Notably, the pass-through of increasing input costs to end products saw the output cost index rise at its fastest pace on record.”