Irish manufacturing activity marked strong growth in November with a rebound from the slowest expansion in 10 months the previous month, according to new data.
The AIB Ireland Manufacturing Purchasing Managers Index (PMI) rebounded to 52.8 in November, up from 50.9 in October, according to the bank. Any figure greater than 50 indicates overall improvement in the sector.
The rise in sectoral activity, AIB says, has been driven by a strong increase in new orders, especially through new export sales, and renewed growth in production. These have combined to drive optimism among decision makers in the sector, which has reached its highest in 11 months.
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The demand for Irish exports strengthened last month – even the slight growth marks a positive movement, as it is the first month since July that demand for Irish goods abroad has grown.
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AIB chief economist David McNamara said the improvement in manufacturing activity was “driven by strong gains in current output and new orders”, and noted that the Irish manufacturing sector, as measured by the PMI, is stronger than readings for the euro zone, UK and US.
Dampening some of the positive indicators, Mr McNamara noted that employment growth has “slowed to near stagnation, extending a recent trend of weakening growth in hiring”.
Firms fared differently in hiring activity, McNamara explained that “some firms reported adding new hires during the month, others reduced their workforce in November”, but that manufacturers are optimistic about “improved sales and expected new contracts in the coming year.”
After hitting its lowest rate in 17 months in October, driven by lower raw material prices, Irish manufacturing firms experienced a sharp increase in their operating expenses during November. This was brought about by a turnaround in fortunes on raw material costs.
While input price inflation was significantly higher than in October, it was still well below the long-run average, AIB noted. This has yet to translate into much of an increase in costs charged to customers, however, as price inflation was among the weakest in the past two years.
Delivery times have continued to increase, driven by lengthening lead times for manufacturing inputs in November, making it a seven-month streak of rising delivery times which was blamed on transportation and congestion issues.
Despite more challenging market conditions in the sector, manufacturers remained optimistic about the year ahead.
The highest degree of optimism in nearly a year, respondents credited it to expectations of improved sales performance and the forthcoming signing of new contracts. The measure was above the 70 mark, an indicator of significant confidence.
S&P Global compiles the AIB Ireland Manufacturing PMI from responses to questionnaires sent to purchasing managers in a panel of about 250 manufacturers.
