The manufacturing sector improved for the first time in three months even as the cost of raw material rose to its highest level in six months, according to AIB.
The bank’s latest PMI report, which monitors the health of the manufacturing sector, found cost burdens rose at a sharp and accelerated pace at the beginning of the year. The rate of input price inflation quickened for a second month, running to the fastest since July 2024.
General price rises and increased charges for raw materials were said to have driven up operating costs for Irish goods producers. The rate of output charge inflation quickened slightly from that seen in December and exceeded the long-run series average.
Overall, 2025 was said to have commenced on a “solid note”, with expansions in both new orders and output.
Confidence outlook for the year ahead remained “strongly optimistic”, with many businesses planning to expand capacity. Consequently, employment was up at a solid and accelerated pace.
However, purchasing activity continued to fall, with a still subdued business environment and elevated inventories.
The seasonally adjusted PMI reverted above the neutral 50 mark that separates expansion from contraction for the first time in three months during January. A reading of 51.3, up from 49.1 in December indicated a modest improvement in the health of the sector.
Underscoring the headline figure was renewed growth in new orders and output. New business rose following two consecutive months of contraction. That said, the latest uptick was only fractional.
Overall growth in new orders was also weighed down by a continuing decline in new export sales. New export orders have now fallen for a year, although the rate of decrease eased from that seen in December.
Meanwhile, output rose in response to an upturn in new business. The rise in production followed a sharp contraction in the prior month. Increased output also allowed manufacturers to renew their accumulation of finished goods.
A still overall subdued demand environment meant that input buying was reduced for a second straight month, albeit at a softer pace.
Reduced buying activity meant that goods producers based in Ireland dipped into their holdings of pre-production items to meet output requirements. The rate of stock depletion was only slightly less pronounced than December’s 11-month high.
Irish manufacturers continued to clear their backlogs for a third straight month in January. Levels of outstanding work were reduced at a solid pace, albeit much weaker than seen in the prior month.
Despite keeping on top of their backlogs goods producers were keen to raise their employment levels in January. Job creation was recorded for a second month running, with the latest uptick the most pronounced since August 2024 and solid overall.
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