Irish factory sector still shrinking but expectations remain positive

(Alliance News) - Ireland's factories had a weak end to 2022, survey results showed on Tuesday, but firms' expectations for 2023 remain positive, if subdued, according to Davy Research

Latest figures from the AIB Ireland manufacturing purchasing managers' index showed the Irish factory sector was unchanged at 48.7 points in December, but still in contraction territory below 50 points for a second consecutive month.

"Orders have been in decline since June reflecting weakening demand," commented Oliver Mangan, AIB chief economist. "This has resulted in the downturn in manufacturing activity seen in the closing two months of the year."

Production declined for the sixth time in seven months.

However, analysis from Davy Research said firms' expectations for 2023 remain positive, albeit subdued, as manufacturing employment expanded in December ahead of increased capacity initiatives for the new year. This was after staff cuts in November, according to AIB.

Firms reportedly stressed concerns about the economic outlook, energy crisis and high inflation as being drivers of held-back sentiment. Even so, Davy said employment increases last month tempered the impact of this.

Davy added performance was slightly better than the flash euro area and UK readings of 47.8 and 44.7 points respectively, which were finalised at 47.8 and 45.3.

The AIB Ireland manufacturing PMI also showed that pressure on supply chains eased further in December, resulting in the slowest increase in input prices since February of last year.

While new orders saw their sharpest pace of decline, excluding during the pandemic, Davy said this was largely due to domestic demand, with export orders being more encouraging and falling at their softest pace in the current seven-month period of decline.

Supply chain issues continue to be resolved, according to Davy, as only 12% of firms reported longer delivery times. Firms also reported excess stocks and inventories rising for the 21st consecutive month and at one of the fastest rates on record.

Davy added the rate of input price inflation eased again to a 22-month low, although output prices continued to rise at a faster rate than in November. However, this still represented the second-slowest rise in the last 19 months.

The PMI is compiled by S&P Global from the responses to a questionary sent to 250 Irish manufacturers, with data collected from December 6 to 16.

By Greg Rosenvinge, Alliance News reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.