Irish factory output growth slows as sterling weighs

The growth in the output of Irish factories slowed dramatically in May, a monthly survey of Irish purchasing managers has showed.

This is further evidence that the Brexit debate in Britain is already having an effect here — even before the June 23 vote on EU membership.

The Investec manufacturing PMI index shuddered to its slowest growth in almost three years and demand for Irish exports weakened in Britain while gains for the euro against sterling have helped erode price competitiveness advantages for Irish firms selling goods across the Irish Sea.

The index recorded a May reading of 51.5, down from 52.6 in April, and just barely above the 50 reading that marks the difference between growth and contraction in the manufacturing industry, according to the survey.

Philip O’Sullivan, chief economist at Investec Ireland, said Investec “expected at least some of the weakness” relates to weaker demand in the UK and fall of sterling against the euro.

However, “with momentum appearing to be building behind the ‘Remain’ campaign, sterling has recently begun to strengthen against the single currency, which augurs well for the near-term outlook for many Irish exporters,” Mr O’Sullivan said.

New export orders contracted after 34 months of consecutive growth, the survey found.

The sterling exchange rate plays a pivotal role in the amount of Irish exports of goods shipped across the Irish Sea.

Sterling weakened for a third day against the euro yesterday amid investor concern over a possible Brexit.

The currency had fallen sharply on Tuesday, triggered by a poll that signalled an increase in support for Britain to leave the EU.

Paddy Power spokesman Feilim Mac an Iomaire said the bookie had shortened its odds on a ‘Leave’ vote to 5/2, or a probability of 28.5%, after the release of UK immigration figures last week.

The probability of the UK staying in are still high at almost 78% but down sharply from the 90% chance before last week’s data release on immigration.

The latest YouGov poll for Handelsblatt showed support for the two sides neck and neck at 40%.

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