Manufacturing activity expanded again last month, albeit at a slower rate amid growing uncertainty over Brexit.

Investec’s headline purchasing managers’ index (PMI) softened slightly to 51.3 in September from 51.7 the previous month, but remained above the 50 line that separates growth from contraction.

The sub-index for new orders rose for a second successive month but at slower rate of expansion with more than 24 per cent of panellists reporting a rise.

The new export orders index returned to growth after two months of declines, with anecdotal evidence pointing to signs of improving global demand.

On a negative note, the sub-index for employment ended a 39-month sequence of expansion. The rate of decline here was only minimal, however.

The report noted some panellists indicated that departing staff had not been replaced, while others reported lowering staffing levels in response to recent weakness in new orders.

Depletion

The backlogs of work index also showed a ninth successive monthly depletion in outstanding business.

"We would not be too optimistic about the prospect for a near-term return to job creation," Investec economist Philip O'Sullivan said.

“All in all, the above does little to change our narrative from the previous month, namely that working capital management – joined in September by a more cautious approach to hiring – points to well-founded caution on the part of Irish manufacturers as we head into the year end,” he added.

For the euro area as a whole, manufacturing accelerated in September as incoming new business grew at the fastest pace in three months.

A PMI for manufacturing rose to 52.6 from 51.7 in August, in line with earlier estimate, IHS Markit said on Monday. The expansion was driven by stronger demand from both domestic and international customers, the London-based company said in a statement.

Rebound

While the report indicates a rebound in confidence after a third quarter marked by political uncertainty and signs of a slowdown, the improvement remains patchy. Headwinds include slumping demand and the fallout from the UK’s decision to leave the EU, as well as concern that European Central Bank stimulus is reaching the limit of its effectiveness.

“Production gains are being driven by welcome signs of improving demand from both within the region and from wider export markets,” said Chris Williamson, chief business economist at IHS Markit.

Germany’s manufacturing PMI rose to a three-month high, and the second-best reading in 2½ years, Markit said. Strong performances were also seen in the Netherlands and Austria. Spain, Italy and Ireland registered weaker growth, while manufacturing in France continued to decline and Greece slipped into contraction.

Output in Britain’s manufacturing sector reached its highest level for more than two years as the industry continued to bounce back from a post-Brexit vote slump. The closely-watched Markit/CIPS UK PMI said output hit 55.4 last month, up from 53.4 in August, and above economist expectations of 52.1. A reading above 50 indicates growth.

The move means output hit its highest level since June 2014 in September and shows a marked improvement since it dropped to 48.3 in July, the first month after Britain voted to leave the European Union.