Rising costs and a slowdown in new business failed to halt manufacturing growth this month, figures published on Friday show.
Irish factories boosted production for the seventh month in a row in July, according to AIB’s Ireland Manufacturing Purchasing Managers’ Index (PMI).
“Production volumes expanded at a robust pace in July,” said the report. Growth was up fractionally since June and faster than the average for the first half of the year, it said.
The index reached 53.2 in July. Any reading above the benchmark 50 signals growth, while a result below that figure indicates contraction.
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Irish manufacturers bucked European and US trends that saw factories slowing production this month. Eurozone manufacturing dipped to 49.8, while it slipped to 49.5 in the US and 48.2 in the UK.
Manufacturing employs 264,000 people in the Republic, according to the latest official calculations, making it the State’s single biggest industry by job numbers.
This month’s growth lagged behind June’s return of 53.7. The report indicates that a slowdown in the rate at which new orders increased contributed to this.
However, new orders from abroad grew for the first time in four months, the survey says. Some Irish manufacturers are breaking into new markets, winning business from customers in Asia and the Middle East.
Manufacturers also complained of higher costs this month, with raw material prices increasing and suppliers bidding to pass on extra transport charges.
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However, the euro’s rise against the dollar eased some of this pressure, while businesses were also able to pass on extra costs to customers.
Factories continued to hire new workers in July, with the pace of recruitment matching a high hit the previous month.
David McNamara, AIB chief economist, said manufacturers remained optimistic despite the prospect of tariffs on exports to the US.
Around one in three of them expect to continue increasing production, while just 8 per cent believe it will fall, he said.
“Some firms cited the potential for pent-up demand if global trade uncertainty recedes over the coming year.”
AIB’s survey covers 250 leading manufacturers of food, drinks, pharmaceuticals, high-tech equipment, plastics and a large number of other products, many of them for export.
Simon McKeever, chief executive of the Irish Exporters’ Association cautioned that the US, a key market for Irish goods, posed the biggest challenge to the Republic’s manufacturers.
EU Commission president Ursula von der Leyen agreed to 15 per cent tariffs on exports to the US at a meeting last weekend with president Donald Trump.
US importers are liable for those charges, but they could ask Irish exporters to share some of the costs, prompting companies here to seek savings.
Exporters want the EU to introduce a tariff adjustment fund to aid companies in dealing with the new regime and to invest in finding new markets, which Mr McKeever cautioned was challenging.
“We need to invest in research and development and marketing,” he said. “We cannot necessarily sell what we are selling into Europe and into the US in the Far East because they have different standards, different packaging and so on.”
Official figures show that 53 per cent of Irish exports went to the US in the first four months of the year as companies moved to anticipate tariffs.
Mr McKeever suggested that trade could slow as businesses waited to see how the tariff deal would work in practice.
