‘Modest improvement’ for manufacturing sector in October

Activity in the Irish manufacturing sector saw a modest improvement in October, as new orders continued to recover having fallen sharply in the wake of June's Brexit vote. According to the Investec Manufacturing PMI Ireland report, which indicates the health of the sector, the headline PMI improved to 52.1 last month from September's 51.3 reading.

Philip O’Sullivan, a economist with Investec, previously pointed to “well-founded caution” on the part of Irish manufacturers as they head into the year’s end and said that October’s “modest improvement is not enough to make us change that assessment, not least given next week’s US elections, which could have a significant impact on the health of the sector”. About 22 per cent of Irish merchandise exports go to the US.

The rate of expansion in the new orders index ticked up marginally in October amid signs of strengthening client demand.

“With that being said, growth in new export orders was only slight as panellists reported that sterling weakness made securing new work in the UK more difficult,” Mr O’Sullivan added.

On the margin side, input costs increased for a sixth successive month as higher costs for items such as food and oil as well as a strengthening of the US dollar against the euro more than outweighed imported deflation from the weak pound. Firms were, however, able to once more pass on at least some of this overall cost pressure by hiking output prices.

Also on Tuesday, China’s official PMI was shown to have expanded at the fastest pace in more than two years in October, adding to views that the world’s second-largest economy is stabilising thanks to a credit and housing boom. Signs of a more broader-based recovery will be welcomed by the government amid growing views that a housing rally may have peaked. Much of China’s better-than-expected growth this year has been highly reliant on spending by often inefficient state firms as private investment languished.

The official PMI stood at 51.2 in October, much stronger than September and the highest reading since July 2014. Economists had expected a far more modest reading of 50.4, in line with the previous month. Levels above 50 indicate an expansion in activity on a monthly basis.

India factory activity grew at the fastest rate since December 2014, boosted by a surge in output and new orders, as Asia’s third largest economy continues to grow at a robust pace. – (Additional reporting Reuters)