Manufacturing moderates in February but stays in growth

MANUFACTURING output in Ireland moderated in February, having ended 2017 at the highest level recorded in the almost 20 years since measuring began.

The headline Purchasing Managers Index (PMI) stood at 56.2 last month, down from January’s 57.6 reading, according to specialist bank Investec’s Manufacturing PMI index.

Any reading over 50 is deemed growth.

Despite the moderation in growth, the sector has now posted 57 successive readings above the 50 mark.

While the rate of growth in overall customer demand moderated in tandem with the headline PMI, respondents to the survey reported a pick-up in orders from overseas customers, with the new export orders index strengthening to a three-month high.

Customers from Europe, Asia and Africa in particular contributed to the increased growth in new export orders.

Investec did, however, note that there were indications of capacity constraint issues for manufacturers, with backlogs of work and suppliers’ delivery times all increasing.

Respondents also reported increasing cost pressures, with prices rising for a range of raw materials, including electronic items, paper and steel.

“Firms have made efforts to pass these cost pressures on to end-customers, with the output prices index posting a 21th successive above-50 reading in February,” Philip O’Sullivan, economist with Investec, said.

“However, the rate of passthrough proved insufficient to prevent the profitability index falling below 50 for the first time in 10 months,” Mr O’Sullivan added.

Respondents reported that they were “strongly optimistic” about the next 12 months.