Manufacturing & Supply Chain

AIB Ireland Manufacturing PMI® data signalled a broad stabilisation in operating conditions in May as the headline index from the survey ticked up to a three-month high. Softer and only marginal contractions in output volumes and incoming new work were recorded during the latest survey period. Irish manufacturers also registered a fresh rise in staffing levels. Moreover, the rate of job creation was the strongest in eight months.

Commenting on the survey results, David McNamara, AIB Chief Economist, said: “The May AIB Irish Manufacturing PMI
survey shows a marginal contraction in activity in the sector, with the headline index rising to 49.8 from 47.6 in April. The third
straight month below the 50 no-change level reflects lingering weakness in output, new orders, and backlogs of work in the
sector last month. The Irish manufacturing PMI remains above the flash May reading for the Eurozone at 47.4 but below the US and UK at 50.9 and 51.3, respectively.

“Output fell for a third month running, but the respective index moved higher, close to the 50 no-change level. A subdued economic environment was cited by respondents in May. New orders were lower, owing to softer domestic and export demand, but the rate of contraction also eased in May. According to anecdotal evidence, the latest fall was linked to weaker demand from key trading partners, including the UK. Amid the subdued demand environment, backlogs of work eased across the sector for a 25th consecutive month.

“Stocks of both inputs and finished goods fell in May on the back of weak demand, which was also reflected in a further decline in purchasing activity. However, delivery times improved, with firms noting that lower demand for inputs and better logistics had in part helped to speed up deliveries.

“Despite the current challenges in the sector, firms accelerated hiring activity, with the Employment Index rising to an eight-month high in May. This reflected still optimistic expectations for activity levels over the next 12 months.

“Input price inflation accelerated somewhat but remains below the survey average. However, output price inflation decelerated sharply compared to last month, with some respondents citing discounts on factory gate prices.

“Looking ahead, firms remain somewhat positive on the outlook for the next 12 months, with the latest reading of the Business Expectations Index in line with last month’s reading, as firms expect renewed growth in client demand in the near future.”