Manufacturing records strong growth on back of robust demand

Almost half of the firms surveyed, 46%, indicated a rise in their average input cost burdens in June, compared to just 1% that experienced a decline. File picture

Despite Irish manufacturing firms increasing prices due to rising costs, the sector continued to see robust growth during June with firms citing improving demand conditions in both domestic and export markets, the latest AIB Purchasing Managers Index (PMI) shows.

During June, the PMI recorded a reading of 54.9 — a slight easing from the 55.9 recorded in May. The Irish manufacturing PMI remains above the flash readings for the Eurozone and UK at 51.3 and 53.1, respectively but below the US at 55.7.

The PMI is 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.

Chief economist at AIB David McNamara said the expansion in June was due to “sustained gains in output, new export orders and stock building”.

"Output rose strongly in June, albeit growth eased slightly from May, with respondents citing continued buoyant order books. This was also evident in solid growth in new orders and export orders, which reached multi-year highs in May, as firms reported a boost to sales despite the geopolitical uncertainty.” 

Export sales expanded at a “solid pace” in June, the PMI said, albeit the least marked for three months. According to the PMI, firms said there was improving demand from the US and Europe but demand from the UK was softer.

Purchasing activity eased in June following the surge in recent months, driven by companies' frontrunning of stock building during the Middle East conflict. However, existing stocks reached the highest rate of growth since January 2023.

"While activity levels improved, the rate of input inflation remained elevated, easing only slightly from the near four-year peak reached in May. Higher costs were mainly linked to the impact of the Middle East conflict on raw material costs and transportation,” Mr McNamara said.

“Nonetheless, with demand still robust, many firms were able to increase selling prices and protect margins, with the output prices index rising to the highest level since December 2022.” 

Almost half of the firms surveyed, 46%, indicated a rise in their average input cost burdens in June, compared to just 1% that experienced a decline.

In terms of output prices, the PMI said there was an “accelerated increase in output charges at manufacturing companies in June”.

The PMI said production volumes increased for the eight successive months in June with higher levels of output attributed to positive demand conditions and resilient business confidence.

There was also a marked rise in new order intakes. “Backlogs of work decreased for the first time in four months and at the fastest rate since January.” 

Employment in the sector has increased each month since December 2024 with manufacturers noting that additional staff hiring and efforts to boost business capacity had helped to reduce their volumes of outstanding work.

According to the PMI, Irish manufacturers’ outlook for the coming year remains broadly positive.

“Around 42% predict an increase in output over the next year, while only 8% forecast a reduction. Manufacturers cited rising customer demand as offsetting heightened global economic uncertainty,” Mr McNamara said.

According to the PMI, firms typically cited positivity towards the demand outlook and the impact of long-term business expansion plans. “However, some firms commented on growth headwinds from elevated global economic uncertainty and intense competition.”