Manufacturing continues to expand despite QE sting

Manufacturers are continuing to expand despite the double-edged impact of the ECB’s €1.1tn quantitative easing programme being of less advantage than is widely believed. 

The sector posted its 23rd straight monthly expansion in April with the Investec Manufacturing purchasing managers index remaining comfortably in positive territory at 55.8 despite a slight moderation on the previous month.

While quantitative easing has been broadly seen as a boon for the manufacturing sector, the double-edged sword of currency movements is impacting on the cost of imported inputs adversely as well as making output prices more competitive.

“More than twice as many firms reported rising new orders compared to those who saw a decline. As we have seen in recent months, Irish manufacturing firms continue to benefit from new product launches and euro weakness, both of which have helped to bolster their sales.

"On the latter, it was no surprise to see the UK and US identified as key sources of new business,” said Investec chief economist Philip O’Sullivan.

“Input prices rose sharply for a second successive month in April, with respondents attributing this to the euro weakness which has pushed up the cost of imported inputs that are denominated in foreign currencies.

“Despite the currency headwind, Irish manufacturing firms’ purchasing activity increased for the 15th successive month in April and at a slightly higher pace than that recorded in March.”

While the outlook for the sector remains positive, the outcome of the UK general election could adversely affect sterling relative to the euro which would be unhelpful to exporters.


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