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Manufacturing contracts amid sharp fall in new orders

The Irish manufacturing sector contracted for the second month running in December, the latest Purchasing Managers Index (PMI) from AIB concludes.

The deterioration in conditions came on the back of a sharp drop in new orders, the study found.

A contraction in new and outstanding work accelerated and output fell, albeit at a slower pace.

Pressure on supply chains eased further, leading to the slowest round of input price inflation since February 2021, the report noted.

The PMI – a composite single-figure indicator of manufacturing performance – registered at 48.7 in December, which was unchanged from November, indicating a second successive monthly deterioration in operating conditions in the goods-producing sector.

The stable trend in the headline figure followed a sequence of seven falls in eight months.

The rate of decline signalled in the final two months of 2022 was not as severe as the lockdown-related downturn in March-May 2020, but slightly stronger than that registered on average during the second half of 2019.

“Orders have been in decline since June, reflecting weakening demand,” Oliver Mangan, chief economist with AIB said.

“This has resulted in the downturn in manufacturing activity seen in the closing two months of the year. As noted, the rate of decline in new orders was quite marked in December, though much less so for new export orders. Falling orders led to another drop in output, the sixth decline in the past seven months,” he explained.

On a positive note, he pointed out that employment levels rose in December – albeit only marginally – after manufacturers cut staff numbers in November for the first time in over two years.

In terms of the 12-month outlook, sentiment also improved, although it remained at a historically subdued level.

“There was a further easing of supply chain pressures, with only 12% of firms reporting longer suppliers’ delivery times. Meantime, the rate of input price inflation while still elevated, continued to ease, hitting a 22-month low,” Mr Mangan said.

Output price inflation also remained high, having accelerated in December, the report showed, although it was still at the second lowest level in the past 19 months.

Article Source: Manufacturing contracts amid sharp fall in new orders – Brian Finn – RTE

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