Manufacturing sees early signs of improvement, survey finds
The rate of job creation was slight as survey respondents said intense margin pressures have remained a constraint on growing their workforces.
Manufacturing output levels rose marginally last month, while sales exports increased for a second consecutive month, indicating early signs of recovery in the sector, a major survey confirmed.
However, the latest AIB Purchasing Managers’ Index of Irish manufacturing showed purchasing activity decreased at a sharp and accelerated pace in the month.
At the same time, factory gate prices were only fractionally lower at the start of the year, with the latest round of price discounting the weakest in the current nine-month period of declines.
Weaker manufacturing conditions have been recorded in four of the past five months, with the latest downturn largely reflecting another reduction in total new orders driven by low domestic demand.
In contrast, export orders rose at the fastest pace in nearly two years.
Higher demand in Europe and Asia were cited as factors in the rebound.
"Manufacturers remained broadly optimistic about the outlook for the year ahead as firms linked this optimism to investment in new products and expectations of a broader upturn in demand,” said AIB chief economist David McNamara.
About 46% of the survey panel predicted an increase in output during the year ahead, while 12% forecast a reduction.
This signalled the lowest degree of confidence since May last year.
The sector is still struggling to escape contraction territory despite positive signs, and new challenges are putting pressure on factories, including chaos on the Red Sea, especially for imports sourced from Asia.
The index rose from 48.9 in December to 49.5, but fell short of the 50 mark which signals industry health.
This situation may improve in the coming weeks as EU members discuss a potential Red Sea naval mission by mid-February to protect ships from attacks by Yemen's Iran-backed Houthi militia.
Higher shipping costs and supplier price hikes linked to increased delivery times due to trade disruptions on items shipped were offset by price declines in raw materials and energy prices.
Meanwhile, some manufacturers commented on pressure to reduce output charges in response to lower demand, while others noted higher staff salaries had led to rising prices.
Ongoing global economic uncertainty continues to knock factory workers confidence, even with a strong start to the year for export sales, said Mr McNamara.
New product launches and long-term business expansion plans were cited as factors supporting employment growth at the start of the year.
Greater staffing numbers also contributed to a sustained reduction in unfinished work and order backlogs.
The rate of job creation was minimal, however, as survey respondents said intense margin pressures have remained a constraint on growing their workforces.
- Additional reporting by Reuters
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