Ireland's manufacturing sector is suffering its most protracted downturn in eight years, according to data published on Thursday.
The AIB purchasing managers index for December showed activity in the sector slowing down again as the year came to a close. The reading of 49.5 was down on the November figure of 49.7. Any reading below 50 signals a contraction.
Activity in the sector has been below that critical figure of 50 for six of the past seven months, making it the longest downturn since the second half of 2011 through to early-2012, the authors of the report state.
AIB chief economist Oliver Mangan said the standout feature of the December data was the marked decline of new export orders.
“These have contracted at a significant pace right through the second half of 2019,” he said. “Yet again survey respondents called out the weakness in orders from the UK in particular, where Brexit-related uncertainty is weighing on demand.
Overseas demand
“The softness in overseas demand is resulting in an ongoing fall in order backlogs and a build-up of stocks of finished goods. Firms have responded by cutting production levels and shedding jobs. Employment in manufacturing declined for the second month in a row in December, albeit very marginally.
But he was wary of reading too much into the month’s figures, describing the downturn as “mild” and noting that the index had averaged 50.0 for the fourth quarter as a whole. That indicates the sector is stagnating rather than contracting over the longer term, he said. The fourth quarter average was up on the reading of 48.7 recorded in the three months to September.
“The Irish December PMI reading of 49.5 remains well above the flash PMI for the euro zone, which is put at 45.9, and the level of 47.4 in the UK, as the stronger domestic economy helps support activity here,” Mr Mangan said.
Six-month high
Input prices continued to rise in December, the survey found, extending the current sequence of increases to 44 months, the second-longest in the survey history. Greater cost pressures were partly attributed to the recent strengthening of sterling against the euro.
However, Mr Mangan noted that the rate of inflation had eased last month to the second-weakest since July 2016,
“On a positive note,” he concluded, “confidence among Irish manufacturers regarding future output rose to a six-month high in December, suggesting that firms expect activity to pick up in 2020”.
Optimism has been strengthening since September, with businesses pointing to new products, improving US and European demand and reduced Brexit uncertainty.
However, at 42 per cent, the figure remains well below its long-run trend (71.8), and the 2019 average (67.6) is the lowest for any calendar year since the series began in 2012.
