Manufacturing sees solid growth but rising costs puts pressure on margins

Survey shows an acceleration in input price inflation, with some firms citing greater raw material and transportation costs

Chief economist at AIB David McNamara said output 'rose at an accelerated pace in July', with respondents citing a 'boost to production volumes from stronger demand'.

Irish manufacturing saw a solid increase in production during July, but higher transportation bills and a general increase in raw material prices put pressure on margins, the latest AIB Purchasing Managers’ Index (PMI) shows.

During July, the index reading stood at 53.2 — easing slightly from 53.7 in June. The PMI is a single-figure indicator of manufacturing performance derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.

Any figure greater than 50.0 indicates overall improvement of the sector. The rise in July was broad-based, with growth in output and new orders, and a sharp rise in employment.

Chief economist at AIB David McNamara said output “rose at an accelerated pace in July”, with respondents citing a “boost to production volumes from stronger demand”.

“This was also reflected in continued growth in new orders and a first rise in export orders in four months,” he said.

Employment in the sector also expanded sharply, with the pace of hiring in line with the three-year high reached in June.

However, the survey showed an acceleration in input price inflation, with some firms citing greater raw material and transportation costs.

“Although others noted that the appreciation of the euro against the dollar had alleviated some cost pressures,” Mr McNamara said.

“Output prices increased at a similar rate to last month, as manufacturers passed on cost increases and maintained margins,” he added.

On the sector’s outlook for the coming year, Mr McNamara said despite the tariff uncertainty, “Irish manufacturers maintained a broadly positive assessment of the outlook for activity levels”.

“Around 35% of the respondents predict a rise in output levels during the year ahead, while 8% expect a decline. Some firms cited the potential pent-up demand if global trade uncertainty recedes over the coming year,” he said.