Despite rising costs driving Irish manufacturing firms to hike prices, the sector has showcased robust growth in June, buoyed by expanding demand in both domestic and export markets, according to the latest AIB Purchasing Managers Index (PMI). The PMI score for June came in at 54.9, a slight dip from May’s 55.9. However, it remains comfortably ahead of the flash readings for both the Eurozone and the UK, which recorded 51.3 and 53.1, respectively, while the US stood at a healthier 55.7.
The PMI, which assesses factors such as new orders, output, employment, and inventory levels, indicates that any figure above 50 reveals overall improvement in the sector. This month’s strong reading reflects “sustained gains in output, new export orders, and stock building,” noted David McNamara, chief economist at AIB. He elaborated that manufacturers experienced solid order books, despite a slight easing in output growth compared to May.
Export sales continued to grow at a solid pace, with notable demand from the US and Europe. However, UK demand appears to be lagging. Purchasing activities softened following a period of intense stock-building in response to disruptions linked to the Middle East conflict. Nevertheless, existing inventories are at their highest growth rate since January 2023.
While activity remains vibrant, the input inflation rate has only eased marginally from a near four-year high in May. Rising costs, particularly influenced by geopolitical tensions affecting raw materials and logistics, continue to challenge manufacturers. Yet, encouragingly, many firms managed to pass on these costs to consumers, resulting in the output prices index reaching its highest level since December 2022. According to the PMI, nearly 46% of surveyed firms reported an increase in average input costs, while just 1% noted a decline.
In a bright note for the sector, production volumes saw growth for the eighth consecutive month, attributed to positive demand conditions and sustained business confidence. There was also a marked increase in new order intake, with backlogs of work decreasing at the fastest rate since January.
Employment in manufacturing has been on the rise each month since December 2022, driven by companies hiring more staff to boost capacity and address outstanding workloads. The outlook for the next year is largely optimistic, with around 42% of manufacturers expecting output growth, as they cite sustained customer demand, balancing the challenges posed by global economic uncertainty and fierce competition.
So, while it’s promising that the manufacturing sector is flourishing amid rising costs, one might wonder: how long can this positivity last? With storm clouds of economic uncertainty looming, one can only hope that firms aren’t just whistling in the wind. As for predicting the future, it’s easier to read tea leaves than anticipate the next twists in this volatile landscape—especially with so many moving parts.
Interestingly, did you know that Ireland’s manufacturing sector has seen a resurgence in recent years, contributing about 30% to the country’s GDP? It’s a vital component of the economy, reflecting how interconnected our local production is with global markets.
