Upbeat Irish manufacturers continue to hire more staff but cost pressures are still looming 

AIB Purchasing Managers Index is increasingly positive with a rise in new orders in February for the first time in nine months 

AIB's Purchasing Managers Index suggests an increase in new orders allowed factories to continue to hire more staff for the third month in a row. Stock picture

Irish manufacturers are becoming increasingly upbeat about the outlook for the year as factories saw a rise in new orders in February for the first time in nine months, but inflationary pressures remain, a major survey shows.

The increase in new orders allowed factories to continue to hire more staff for the third month in a row, leading to a sharp drop in backlogs, the AIB Purchasing Managers Index (PMI) shows. The PMI surveys the managers best placed to monitor manufacturing activity.

AIB chief economist Oliver Mangan said: “A key factor behind the improvement in Irish manufacturing was the first rise in new orders since last May, albeit a modest one and amid continuing weakness in exports orders.”

AIB chief economist Oliver Mangan said firms are passing on increases in raw material, energy, transport and labour costs to customers. File picture

Factories are being held back by a lack of demand amid an ongoing volatile economic environment. 

For example, demand from overseas fell further in February and at the sharpest pace since May 2020.

Manufacturers also continue to battle price pressures. Anecdotal evidence suggests that elevated costs across a broad range of inputs continued to be partly passed on to clients in the form of higher selling prices.

Price inflation eased midway through the first quarter of the year but remained above historical averages. Mr Mangan said: 

Prices are still rising, with firms reporting further increases in raw material, energy, transport and labour costs, which they are passing on in higher selling prices to customers.

Firms are optimistic about future output though and registered the strongest degree of confidence in a year as production volumes stabilised last month.

The overall reading of 51.3 for February puts manufacturers firmly back in expansion territory and is up from 50.1 in January and 48.7 in December and November, when the sector was in a period of contracting.

By contrast, the flash manufacturing PMIs for the US, eurozone, and UK remained in contraction territory in last month, at 47.8, 48.5, and 49.2, respectively, pointing to ongoing declines in manufacturing activity in those economies.

Europe’s dominant service sector roared ahead while manufacturing activity struggled, said data company S&P Global in its separate PMI last month.

Read More about #Energy Prices