The strengthening euro is compounding the problems facing an Irish manufacturing sector already struggling to cope with the prolonged downturn, a survey showed today.
The NCB Purchasing Managers' Index (PMI), which measures activity in the manufacturing sector, reported the sharpest contraction of orders since December 2001.
The key indicator of activity remained below the no change mark of 50 in May, indicating a deterioration in business conditions for the eighth consecutive month.
A decline in the PMI to 47.5, from 48.2 in April, suggested that the rate of deterioration accelerated slightly during the month, following steeper declines in order books, production, employment and stocks of purchases.
Mr Dermot O'Brien - chief economist at NCB Stockbrokers - said that activity is showing no sign of a post-Iraq bounce with a further decline in the PMI in May.
"While the strength of the currency was cited as a factor curtailing export orders, both input prices and output prices [on the newly introduced series] were under downward pressure. This, at least, is an encouraging development," he said.
Measured overall, production levels were scaled back for the fifth successive month in May. Firms reported that output had again been reduced in response to weakening demand.
Many firms reported that the strength of the euro against other major currencies had reduced the competitiveness of their products abroad. As a result, export orders fell significantly.
In line with the downturn in production levels, employment in the manufacturing sector declined for the ninth successive month in May.