Manufacturing sector reports strongest jobs growth in four years

'Irish Manufacturers' assessment of the outlook for activity levels remains broadly optimistic,' states AIB chief economist 

Supply challenges in the sector remain, with manufacturers pointing to transportation delays and reduced raw material availability.

Ireland’s manufacturing sector reported its strongest jobs growth in over four years on the back of a rise in new orders and output.

The latest AIB Manufacturing Purchasing Managers’ Index signalled another month of robust growth across the sector, with a marked expansion in production volumes and new orders. 

Output expectations picked up to the strongest since February amid hopes of a sustained upturn in demand and, as a result, employment numbers increased to the greatest extent for just over four years.

At the same time, input price inflation eased further from May’s recent peak, but supply chain challenges persisted — with many manufacturers reporting transportation delays and reduced raw material availability.

The headline PMI for July was 55.1, up from 54.9 in June. Any figure greater than 50.0 indicates overall improvement of the sector. Higher levels of production have now been recorded for nine consecutive months.

According to the survey, the expansion is being fuelled by the domestic market, with new work expanding at a robust pace.

New export orders expanded only marginally and at the slowest pace since February.

Manufacturers commented on greater sales to European clients, but some noted headwinds to international demand from elevated geopolitical uncertainty.

Job creation was a bright spot in July, with the rate of employment growth accelerating for the third time in the past four months to its highest since May 2022.

Anecdotal evidence suggested that robust order books, improved business optimism, and long-term efforts to boost production capacity had led to rising payroll numbers.

“Irish manufacturers’ assessment of the outlook for activity levels over the coming year remains broadly optimistic,” AIB chief economist David McNamara said.

“Around 46% predict an increase in output over the next year, while only 9% forecast a reduction. Manufacturers cited positive sentiment regarding long-term business expansion plans.

“Output rose strongly in July, albeit the pace of increase eased slightly from June, with respondents citing continued healthy order books. This was also evident in a solid rise in new orders, but export orders growth slowed, as firms reported some headwinds from geopolitical uncertainty.”

Many Irish producers reported reduced raw material availability due to the transportation delays and ongoing supply chain disruptions related to the Middle East conflict.

“Given the robust demand backdrop, employment rose at the sharpest pace since May 2022,” Mr McNamara said.

“Purchasing activity was in line with June’s more modest outturn, following the surge in prior months, driven by frontrunning of stock building during the Middle East conflict.

“However, existing stocks grew for a fifth consecutive month, and firms maintained precautionary stockpiles.”