Manufacturing & Supply Chain

December data pointed to subdued business conditions across the Irish manufacturing sector, with a sustained reduction in new orders contributing to the fastest decline in production volumes since June. Goods producers reported a sharp drop in input buying and a shift towards tighter inventory management in response to fewer workloads, according to the AIB Ireland Manufacturing PMI® for December 2024. Employment nonetheless increased for the first time in four months. This reflected a more upbeat assessment of the business outlook. Manufacturers signalled the strongest business activity expectations for the year ahead since September 2023.

Commenting on the survey results, David McNamara, AIB Chief Economist, said: “The AIB Irish Manufacturing PMI indicated that the sector lost further momentum in December, with the headline index falling to 49.1 from 49.9 in November. This marks the second consecutive month of contraction, and means activity has fallen in eight months throughout 2024. The decline in December was due to weakness in output, new orders, and purchases. Despite the fall, the Irish manufacturing PMI remains above the flash December readings for the Eurozone, US and UK at 45.2, 47.3 and 48.3, respectively.

“Output fell sharply in December at the fastest pace since June, following a two-month period of expansion. Survey respondents cited weaker order books and sluggish demand conditions. On new orders, the trend remained weak, with declines in total orders and export orders. Exports were particularly soft, with the UK and Eurozone cited as key drivers of the decline in December. Despite the muted demand backdrop, hiring moved back into expansionary territory for the first time in four months as firms planned for new projects and investment plans. However, despite the positive signs on employment, purchasing activity and stock building by firms continued to fall in December.

“There was some mixed news in terms of inflation for the sector. The rate of inflation for input costs was slightly higher and output cost inflation decelerated, as firms cited difficulty in passing on price increases to customers. Firms pointed to raw materials and transportation costs as key sources of inflationary pressure in December. Irish manufacturers maintained an upbeat assessment of the outlook for activity levels over the coming 12 months. Around 50% predict an increase in output over the course of 2025, while only 6% forecast a reduction, with concerns emerging in relation to US trade tariffs and wider international trade frictions.”