Activity in Ireland’s manufacturing sector slipped again in November amid weakening global economic conditions, a decline in new orders and a slowdown in hiring across the sector.
Overall manufacturing activity has now fallen for the third time in six months, the bank said in its latest purchasing managers’ index (PMI) report, despite an increase in output, which edged to its highest level since February.
However, the November headline index, based on a survey of about 250 companies, dropped below the neutral 50 threshold — which separates growth in activity from contraction — to 49.9 from 51.5 in October, indicating a decline in activity. The drop-off followed a slight improvement in activity in October from September after several months of contraction.
AIB said the latest reading was “notably weaker” than the historic average of around 52 and was driven by a downturn in manufacturing order books.
The manufacturing PMI is closely watched as it is a near real-time measure of the health of a key part of the economy. Unlike other data points which are usually from several months prior, the PMIs are often a leading indicator of any changes in the economy that might feed through to other data in the months head.
Companies reported an overall worsening of business conditions despite an expanding production volume, which increased for the fourth month in a row.
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Yet, new orders were a “weak spot” in November, AIB said. The decline in new business was the fastest in a month since June, “with goods producers widely commenting on lacklustre customer demand and less favourable global economic conditions”, according to the report.
Firms also attributed the decline in new business to “subdued activity from the main export markets”, said David McNamara, chief economist at AIB. “Against the backdrop of a muted demand environment, hiring declined for the third month in a row.”
Meanwhile, price pressure signals were “mixed”, said Mr McNamara.
“The rate of inflation for input costs eased for the second straight month,” he said. “However, output charge inflation accelerated to its second-highest reading since March 2023.”
Irish manufacturing firms remain upbeat about their prospects for the next 12 months, however.
Almost half of survey respondents predicted an increase in output levels in the next 12 months, with only 11 per cent anticipating a decline, according to the report.
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“Optimism was often linked to forthcoming business investment, long-term expansion plans and hopes of a revival in export sales,” said AIB. “That said, the degree of positivity moderated since October and was below the long-run series average. Some firms cited concerns about competitive pressures and the general economic backdrop.”
Mr McNamara also noted that the Irish headline index was above the flash PMI readings for the euro area, the US and the UK for November.
Business activity in the euro zone contracted unexpectedly in November, according to a flash composite PMI that was published late last month. It showed that services had joined the single currency area’s manufacturing sector in a downturn characterised by a decline in new business coupled with still-heightened inflationary pressures.
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