Manufacturing slide continues in December

Falling orders hit Irish factories last month, continuing a long-term slide in manufacturing, according to a report published on Tuesday.

However, export orders rose and businesses said they were more optimistic about the year ahead.

Fears for the short-term economic outlook prompted customers to cut stock purchases, hitting new orders for goods from manufacturers, the AIB Manufacturing Purchasing Managers’ Index (PMI) shows.

The index slipped to 48.9 last month. The PMI takes 50 as its benchmark. Any reading below this figure signals a contraction while any number above that level indicates growth.

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Last month’s reading lagged the 50 recorded in November and was close to the 49.1 average for last year, which indicated a decline through 2023. The December figure marked the third month in the past four in which manufacturing activity has slowed, though AIB acknowledged that the slide was only slight.

“Survey respondents noted that hesitancy among customers and caution about the broader economic outlook had contributed to lower output requirements,” says the index.

The lack of demand and difficulties hiring skilled workers acted as a break on recruitment during December, when total employment figures remained largely unchanged, the report shows.

Oliver Mangan, AIB chief economist, says the survey shows a slight deterioration in business conditions last month.

“A marginal fall in output, renewed decline in new orders, stable employment and marked destocking were the key features of the December PMI survey,” he adds.

“While new orders fell, partly due to a focus on destocking, export orders rose for the first time in four months, with manufacturers reporting an upturn in demand from the UK.

“Difficulties in recruitment was cited as the main factor constraining employment growth, which was broadly unchanged in the month.”

Factories also face growing pressure on profits as costs are rising but prices are falling in the face of renewed competition, the economist notes.

The index shows that suppliers are passing on higher staff costs, offsetting declines in commodity prices. Costs rose at their fastest pace for nine months, the survey says.

However, Mr Mangan points out that manufacturers are optimistic about 2024, with the business expectation index inching up to its highest level since September. Almost half those surveyed for the report expected production to increase over the course of this year, while just 7 per cent of them predicted further falls.

A likely turnaround in demand, long-term investment plans and proposed new product launches helped boost manufacturers’ optimism last month.

Mr Mangan notes that the Irish PMI remained above readings elsewhere with flash numbers for the euro zone as a whole coming in at 44.2 and the UK at 46.4. The Irish figure was also higher that the flash US index of 48.2.