Input cost inflation for Irish manufacturers accelerated sharply in January and reached its highest level for three years, according to new data from AIB.
The bank’s latest PMI survey, which is effectively a pulse check of the sector, found manufacturers were “widely” concerned about higher raw material prices and “efforts by suppliers to pass on rising wage costs ... factory gate charges also increased at the start of 2026, albeit to a much lesser extent than input costs ... subdued demand and international competition were cited as weighing on pricing power.”
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The headline PMI figure is an indicator of manufacturing performance. It is derived from factors such as new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50 indicates overall improvement of the sector.
Adjusted for seasonal factors, the PMI posted 52.2 in January, signalling a “moderate overall” improvement.
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“Irish manufacturers experienced a relatively subdued start to the year, with production and incoming new work rising at weaker rates than in December,” said AIB.
“This was often attributed to lacklustre export demand and hesitancy among clients in response to heightened economic uncertainty. However, goods producers are optimistic about their growth prospects for the next 12 months.
“Confidence reached its highest since August 2023, which supported solid rises in input buying and staff hiring during January.”
The bank said a faster upturn in manufacturing employment and renewed inventory accumulation were positive influences on the headline PMI in January.
“This helped to offset the impact of weaker expansions in output and new business,” noted the report. “Production volumes increased moderately in January, but the rate of expansion eased to its lowest for three months.
“This mostly reflected a further slowdown in new business gains at the start of 2026. Latest data signalled only a marginal rise in total new work, with growth the weakest since August 2025.”
AIB said survey respondents cited “elevated economic uncertainty, risk aversion among clients and softer demand across export markets” as the main factors weighing on order books.
“New work from abroad has now decreased in five of the past six months. That said, the overall rate of contraction was only marginal amid some reports of an improvement in European demand.”
Staffing levels across the manufacturing sector expanded at a “solid pace” in January, which extended the current period of growth to 14 months. Moreover, the speed of job creation accelerated to its fastest pace since last July.
Goods producers suggested that long-term business development plans and projected improvements in customer demand had encouraged “greater staff recruitment” in January.
Finally, business activity expectations rebounded to the highest for nearly 2½ years in January. Just over half of the survey panel anticipate a rise in production volumes during the year ahead, while only 7 per cent forecast a decline.
Manufacturers mostly commented on hopes of a turnaround in global demand conditions and improved export opportunities, despite concerns about rising operating costs and fragile confidence among clients.
