Rising inflation is continuing to hit Ireland’s manufacturing sector, according to a new survey.
The AIB manufacturing Purchasing Managers’ index shows that output dropped for the second month running in July.
It states that demand conditions had weakened both domestically and abroad, in part due to rising costs.
“Inflationary pressures remain pronounced, with prices rising at close to their fastest pace since the survey began in 1998,” said Oliver Mangan, chief economist with AIB.
“There were further marked increases in material, energy and labour costs, while the rate of output price inflation remained elevated,” he added.
The headline Manufacturing PMI is a composite single-figure indicator of manufacturing performance derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
The PMI fell to 51.8 last month, down from 53.1 in June and 56.4 in May.
Any figure greater than 50 indicates overall improvement of the sector.
Although the July figure was still above the neutral level of 50, it was the lowest reading since January 2021.
The fall was in line with the trend seen elsewhere – the flash July index fell to 52.2 in the UK, and dropped to 49.6 in the euro zone.
Mr Mangan said the impact of weakening demand on Irish manufacturing activity was most evident in the second consecutive monthly contractions in both output and new orders.
“The drop in new orders resulted in a further easing in capacity pressures, as evidenced by declining backlogs for a third month running,” he said.
“Weakening demand also saw stocks of finished goods rise for the first time in over a year,” he added.
The PMI shows that weakness was also apparent with respect to order book volumes from abroad, as new export orders fell marginally.
Despite sustained falls in output and new work, Irish goods producers expanded their staffing levels further in July.
However, the figures show the pace of job creation was the slowest since February 2021.
The data also shows that the average suppliers’ delivery times lengthened again in July, amid reports of material shortages and transport delays.
However, delays were the least widespread since November 2020.
Looking ahead, the PMI suggests that Irish manufacturers remain positive overall towards the outlook for output over the next 12 months, with optimism ticking up to a three-month high.
However, the level of sentiment remained historically subdued amid concerns around the near-term economic outlook.