Irish factories shed the Brexit blues

Irish manufacturing appears to have shed its Brexit blues caused by the drop in sterling, while UK manufacturing growth slowed significantly, according to the latest surveys of purchasing managers across the world.

The Investec Ireland purchasing manager’s index showed manufacturing here rose in June to a reading of 56 from 55.9 in May, marking the fastest pace for two years and the new orders component of the survey rose for the 11th month in a row.

A reading above 50 indicates that output is growing.

The survey indicated manufacturing has “a strong tailwind behind it”, said Philip O’Sullivan, chief economist at Investec Ireland. 

He said he was unsurprised because Ireland’s factories were highly dependent on external demand.

The equivalent surveys of purchasing managers, also published yesterday, showed factory output growing in most places across the world, but the rate of expansion seems to have slowed in the UK despite the 12% depreciation of sterling against major currencies since June last year. 

Factories in the eurozone rounded off the first half of 2017 by ramping up at the fastest rate for over six years, while Asia’s tech-manufacturing economies were helped by growing global demand for electronics products.

The UK survey suggested the supposed silver lining of a weakened pound — more competitive exports — is proving elusive and could make Bank of England officials think twice about raising interest rates.

June’s manufacturing PMI for the eurozone rose to 57.4, its highest since April 2011, and up from May’s 57.

And suggesting the eurozone’s momentum will continue into the second half, new orders rose at the fastest rate since early 2011, backlogs of work increased at the fastest pace in over 13 years, raw materials were depleted and factories increased headcount at a near-record pace. 

The upturn came alongside factories increasing prices, as they have done for nine months, welcome news for policymakers at the ECB who have been battling for years to get inflation back to its 2% target ceiling.

Factory surveys in Asia showed factories in China, South Korea, Japan and Taiwan picked up in June, driven largely by a recovery in exports. 

While manufacturing expanded at the fastest pace in three months in June in China, business confidence slumped to its lowest level this year amid a government crackdown on debt risks and tightening financial conditions.

US factories powered up in June at the fastest pace in nearly three years, data from the Institute for Supply Management showed. 

Additional reporting: Reuters and Bloomberg

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