NCB STOCKBROKERS yesterday expressed hope the Irish economy would return to growth this quarter as its latest manufacturing survey showed output and new orders fell only slightly last month.
The NCB Purchasing Managers’ Index (PMI), which measures activity in the Irish manufacturing sector, rose to 48.0 from 46.6 in September, the highest level since February 2008 and approaching the 50 mark that separates growth from contraction.
NCB noted that production at Irish manufacturing firms fell for the 20th month running in October, but that the rate of contraction was the slowest during that sequence.
“With global economic activity gathering momentum, we are still hopeful that the Irish economy will begin growing in the fourth quarter of this year, and the latest PMI was comforting in this regard,” said Brian Devine, economist at NCB Stockbrokers.
“Hopefully, the index is going to breach the 50 mark by the end of the year. The new orders are the leading indicator, and usually the headline follows.”
However, he warned of the effect of volatile GDP due to the size of exports relative to the rest of the economy.
“There is, hopefully, an underlying trend toward growth, but because GDP is so volatile I think it’s going to be positive, negative, for a number of quarters.
“The question is whether the trend is just inventory restocking or is it actually going to be positive, and a lot of it will have to do with the upcoming budget,” he said.
New orders were almost back at the level separating growth from decline, registering their best performance since the sub-index was last above the 50.0 mark in February 2008. New business decreased at the slowest pace in the past 20 months of reduction.
Despite the improving overall trend, new export orders in manufacturing declined in October to an adjusted 49.2 from 50.6 in September, which Mr Devine attributed to the weakness of sterling versus the euro.
Spare capacity in the sector continued to be signalled by further declines in backlogs and employment. In addition to workforce restructuring, attempts to reduce costs were a key factor behind the latest “marked” drop in staffing levels, NCB said.
Elsewhere, UK manufacturing unexpectedly expanded in October at the fastest pace in two years. A gauge based on a survey of companies rose to 53.7 from 49.9 in September, the Chartered Institute of Purchasing and Supply and Markit Economics said yesterday in London.
The euro zone manufacturing sector also grew for the first time in 17 months last month. The Markit Eurozone Manufacturing Purchasing Managers Index for October rose to 50.7 from 49.3 in September. This is the first time the reading has been above the 50.0 mark that divides growth from contraction since May 2008.
