Friday, June 14, 2024

Manufacturing activity deteriorates, new orders fall

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Activity in the manufacturing sector deteriorated again in April, new data shows.

The latest AIB Purchasing Managers Index shows that the fall last month was the sharpest rate of decline in nine months.

The headline index dropped from 49.6 in March to 47.6.

Readings above 50 indicate overall growth in activity.

The drop in the headline index reflects underlying weakness in output, new orders, and hiring trends in the sector last month.

“The output index declined for a second month running, falling to its lowest level since October 2023,” said David McNamara, AIB Chief Economist.

“A generally weaker demand environment was cited, including from clients in the construction sector,” he added.

New orders were also sharply lower, owing to softer domestic and export demand.

“The rate of decline in new orders was the fastest since December 2022, while external demand from the UK and Eurozone was again subdued in April,” Mr McNamara said.

Subdued demand meant that staffing numbers stagnated across the manufacturing sector – ending a three-month period of marginal jobs growth.

The latest survey data suggested that hiring was constrained by a lack of pressure on operating capacity, as backlogs of work decreased at the steepest pace since last September

Input buying fell for the first time since January, reflecting weak order books and efforts to streamline inventories.

“On a positive note, input price inflation eased sharply in April to a three-month low, with respondents pointing to cheaper raw material costs,” Mr McNamara said.

“Surprisingly, output price inflation accelerated despite declining demand and points to lingering pricing power within the sector, with firms passing on prior rises in inputs, including labour costs,” he added.

Looking ahead, the data suggests that companies remain somewhat positive on the outlook for the next 12 months.

The latest reading of the Business Expectations Index jumped sharply from the 41-month low recorded in March.

Almost half of respondents still expect a rise in output volumes during the next year, compared to 14% who expect a decline.

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