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Manufacturing & Supply Chain

Irish Manufacturing sector maintains rapid growth in July

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Irish Manufacturing sector maintains rapid growth in July

Irish Manufacturing sector maintains rapid growth in July
August 06
10:23 2021
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Business conditions at Irish manufacturers continued to improve markedly in July, according to the latest AIB PMI® data. New order growth hit a new record high for the third month running, leading to unprecedented increases in both purchasing and backlogs of work. Output rose rapidly but was partly constrained by ongoing supply shortages. Cost pressures remained severe, and output price inflation accelerated to a new survey record pace.

The headline AIB Ireland Manufacturing PMI® is a composite single-figure indicator of manufacturing performance. It is derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases. Any figure greater than 50.0 indicates overall improvement of the sector.

The PMI registered a three-month low of 63.3 in July, down from 64.0 in June and May’s all-time high of 64.1. Nevertheless, the latest figure still signalled a rapid overall improvement in Irish manufacturing business conditions at the start of the second half of 2021, and stronger growth than in any preceding period since the survey began in 1998.

The 0.7 point fall in the PMI since June reflected the employment, stocks of purchases and output components, although these all still provided strongly positive overall contributions. The suppliers’ delivery times and new orders sub-indices had fractionally positive directional influences, with the latter setting a new survey high during July.

Manufacturing new orders continued to boom in July, with the rate of expansion setting a new survey record for the third straight month. The latest data signalled a notable increase in new export orders – the fourth-fastest expansion on record – although the domestic market continued to post stronger overall growth.

With customer spending continuing to rebound as COVID-19 restrictions were lifted, manufacturers boosted output again in July. The rate of expansion was the third-strongest on record since the survey began in 1998, but eased further in comparison to growth of new orders. This resulted in a new record rate of increase in backlogs of work. Outstanding business rose for the fifth consecutive month, and the rate of expansion surpassed May’s then-record pace.

Rising backlogs were partly attributed to ongoing supply shortages. Input delivery times continued to lengthen at one of the most marked rates in the survey history, linked to global raw material shortages and shipping bottlenecks. Brexit-related customs issues were also reported. That said, the proportion of firms reporting delays in July, at 47%, was slightly below the trend over the first half of 2021 (52%).

Wide-ranging raw material shortages and insufficient shipping capacity continued to drive up input prices in July. The rate of inflation eased from June’s near-record pace, but was still the third-highest in the survey history. Manufacturers continued to pass on higher costs to customers, with output price inflation setting a new record high for the fourth consecutive month.

Purchasing activity expanded at a record pace in July as firms built safety stocks in expectation of future price increases and shortages. Pre-production inventories grew at the third fastest rate on record, albeit one notably slower than June’s peak. In contrast, post-production stocks declined sharply.

Output expectations rebounded in July following June’s brief dip in sentiment. More than half of firms (54%) expect growth over the next 12 months from current levels, compared with less than 3% predicting a decline.


Oliver Mangan, AIB Chief Economist, commented: “The AIB Irish Manufacturing PMI for July represented another month of robust growth in the sector. The headline index printed at 63.3, down slightly from 64.0 in June, but this is still consistent with a very strong rate of improvement in manufacturing. Indeed, the index has now remained above 60 for a fourth consecutive month.

“The Irish data remain broadly in line with strong PMIs from the some of the key advanced economies. UK, eurozone and US flash readings of 60.4, 62.6 and 63.1, respectively provide further evidence of the upward momentum being maintained in the sector.

“The sub-components of the Irish PMI survey all point to an on-going strong improvement in business conditions in the sector. New orders recorded its third straight record high, aided by a very strong performance from new export orders as well as on-going strength in domestic orders. The sector continued to add to the size of its workforce, with employment rising for a tenth month running.

“Amid the rapid pace of growth in manufacturing activity, capacity constraints remained very much in evidence. This was reflected in a new record rate of increase in backlogs of work, with supply shortages contributing to the difficulties that firms are facing. Not surprisingly, against a backdrop of shortages and insufficient shipping capacity, price pressures continue to build in the sector. Input prices rose at their third highest pace ever and the passing on of these higher costs to customers saw output prices register another big jump.

“Meanwhile, the 12-month outlook for production improved in July, with over half of firms expecting a pick-up in business over the coming year.”

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