In May, Ireland’s manufacturing sector experienced its sharpest decline in production since February 2021, and it remains in a downturn. However, there was an element of good news: lower demand and lower raw material and energy costs led to the first reduction in selling prices in nearly three years.
AIB’s purchasing managers’ index dropped to 47.5 in May, down from 48.6 in April, indicating three months of negative activity. Demand, new orders – particularly exports – and inventory levels all decreased, and the outlook was not optimistic. Exports have been on a downward trajectory for a full year.
Global manufacturing activities have been largely responsible for the downturn, as weak demand has led to a decrease in production and inventory levels. Additionally, inflationary pressures have been easing, with input prices falling for the second consecutive month.
Nevertheless, Ireland’s manufacturing PMI is still higher than those of the eurozone and UK. The jobs front also saw some positive news, with employment increasing for the sixth consecutive month, albeit at a slower pace than what was seen in the earlier months of 2021. Furthermore, delivery times from suppliers were shorter, due partly to weakened demand.
Although manufacturers anticipate increased output over the next 12 months, their confidence is lower than the long-run series average as there is uncertainty surrounding future orders. This stands in stark contrast to Irish consumer confidence, which is currently at a 14-month high.
