Irish factories record steep drop in production as inflation hits record levels 

Inflation pressures are unlikely to ease according to experts

A fall in manufacturing production also lead to a steeper drop in backlogs and latest data showed a further easing of pressure on supply chains.

Irish factories recorded the steepest decline in production since February 2021, as well as the third successive monthly decline in new orders in August.

The loss of momentum in the sector reflects faltering demand in the face of rising inflation, according to AIB’s latest Purchasing Managers Index (PMI).

"The impact of weakening demand on Irish manufacturing activity is clearly evident in the third consecutive monthly contractions in both output and new orders,” said AIB chief economist Oliver Mangan.

The results of the PMI are being closely watched for evidence that the forces of recession may be building for many major economies.

The headline finding posted a reading of 51.1 in August, down from 51.8 in July. These figures are down from just over 53 in June. Any measure below 50 shows that output contracted in the month.

There was some optimism among purchasing managers as input price inflation eased to a 12-month low, while employment and stocks continued to expand.

Recruitment was linked to the US market and efforts there to boost capacity. However, the rate of job creation was the weakest since January last year.

“While the index remained in expansion territory, it was the lowest reading since October 2020,” said Mr Mangan.

“Much weaker readings, though, have been seen in the rest of Europe for August, with the flash Manufacturing PMI moving down to 49.7 in the Eurozone and falling sharply to 46 in the UK,” he added.

A fall in production also lead to a steeper drop in backlogs and latest data showed a further easing of pressure on supply chains.

Inflation pressures are likely not to ease any time soon according to experts. Inflation reached 9.6% in Ireland in July, Eurostat figures showed. Ireland’s inflation rate has been higher than the average for the eurozone, which is now running at a record 9.1%.