Increased demand spurs solid growth in manufacturing - NCB

Increased demand drove solid growth in Irish manufacturing last month, the latest data show.

The NCB Purchasing Managers' Index (PMI) shows that manufacturing recorded an outturn of 53 on its scale in December.

Any reading above 50 indicates growth on the previous month, while any reading below indicates a fall in business.

The score rose from the 15-month low of 51.6 recorded in November, and was above its long-term average of 52.6. The index showed that manufacturers enjoyed solid growth in new business, which hit 54 during December.

"New orders have now increased each month since September 2003," the report says.

"Anecdotal evidence suggested that marketing campaigns and an improvement in underlying demand contributed to the latest expansion."

New export business, a key area for most manufacturers, helped support the overall growth in new business.

The increase in demand combined with the launch of new product lines to boost the sector's output, that is, what the industry produced during the month.

This rose to 54.7 in December, the highest reading since September's result, which was 56.2.

The report shows that job numbers in manufacturing also rose during the period, although at a slower rate than the rest of the index. Employment hit 51.6 in December, compared to 50.4 the previous month.

The report states that of the companies surveyed that said they increased employment, many were doing so to increase production capacity to meet growing demand.

Manufacturers are still facing a squeeze on their margins. The prices they charge for their goods continued to rise, hitting 55.4 in December, compared with 54.1 in November. But costs increased as well. Input prices, which measures the rate of increase in the cost of production, was 59.1.

Commenting on the findings, Dermot O'Brien, chief economist at NCB Stockbrokers, said they show that Irish manufacturing ended 2006 on a positive note.

"New orders strengthened, with export orders showing renewed growth, and the pace of increase in employment quickened," he said.

l Growth in euro-zone manufacturing remained broadly steady in December, survey data showed yesterday. However, a six-month peak in German factory and output growth contrasted with a sharp fall in the French index.

Meanwhile British manufacturing activity growth slowed unexpectedly last month to its weakest pace since March and pricing pressures continued to ease with input price growth at a 16-month low, a survey showed.

The CIPS/RBS Purchasing Managers Index eased to 51.9, its lowest reading in nine months and confounded analysts' expectations for 52.6 from a downwardly revised 52.5 in November.