The prospects for continued growth across the Irish economy got another boost yesterday, with a reputable survey suggesting that manufacturers are at last benefiting from a pickup in demand at home - not just from surging demand for their exports - and are also hiring more people.
The Investec Purchasing Managers Index for the Republic of Ireland is widely seen as a leading index which has accurately predicted the outlook for manufacturing and a corresponding wider economic upturn, starting in June 2013.
It covers responses from 285 industrial companies across all types of manufacturing, including food and pharmaceutical firms, and attempts to match these firms’ contribution to Irish GDP. It is cited by international organisations, including the former bailout lenders at the IMF and the EU, as a dependable forecasting tool.
Analysts predict that the economy will grow by 5% this year and remain the fastest growing in the eurozone, expanding by a further 5% in 2016.
The latest purchasing manufacturing monthly survey found that the overall manufacturing index expanded again in July, posting the 26th successive month of growth. With a reading of 56.7, the overall index rose at a faster pace than the 54.6 posted in June. Any reading above 50 marks an expansion in the sector.
Significantly, purchasing managers reported “improving client demand and advertising campaigns” for driving demand in overall new orders and a strong demand for consumer goods, in particular.
That may hint that domestic firms are benefiting from a recovery in the domestic Irish economy.
Manufacturers focused on export markets again reported healthy conditions as “the weakness of the euro continued to underpin growth of new export business”. The euro’s weakness, however, also contributed to the increase in some input prices, but businesses appear to be benefiting from the fall in oil prices and other commodity prices too.
“Competition and falling prices in world dairy markets contributed to the latest reduction in output prices, the second in as many months,” said the survey.
Output prices — the prices charged by manufacturers at the factory gate — fell for the second successive month, but at a “modest” rate.
Input prices — the costs of raw materials used by manufacturers — rose in July because of the weakness of the euro against sterling and the dollar. But managers also said some raw materials fell in price. Brent crude oil yesterday rose slightly to $50.11 a barrel, after dipping below $50 for the first time since January. According to the survey, input items that fell included coal, energy, aluminium, raw steel, butter, cheese, milk — for the second successive month — milk powder, and pigs.
Input prices that rose included metals, aluminium tube, foil, steel castings, electrical components, plastic and polymer—both for the second successive month — container board, barley, corn, soya meal, and wheat.
New orders quickened, having risen in each of the past 25 months. New export orders showed a “sharp increase” in July, the fastest since February.
A large slice of manufacturers, 30%,said the weakness of the euro was supporting the latest increase in orders. Employment in Irish manufacturing rose in July, with managers citing expectations for new orders.
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