Manufacturing output contracts to record low as new orders fall

A DROP in new orders and falling employment saw output from the Republic's manufacturers contract to record lows last month.

The NCB Stockbrokers purchasing managers' index (PMI) for manufacturing shows that production contracted "at a marked rate" last month to 44.7, in line with the record low recorded in April.

Any reading below 50 indicates a contraction and June was the seventh consecutive month in which the sector declined. The May PMI was 45.2. "Anecdotal evidence suggested that deteriorating domestic economic conditions contributed to the latest contraction of Irish manufacturers' new order volumes," the report noted.

Orders from outside the State fell for a fourth consecutive month in June as companies reported that the strength of the euro was affecting demand. This saw employment in manufacturing drop "at the second-sharpest rate" in the survey's 10-year history in June and for the seventh successive month. The June employment reading was 43.4.

Input buying, which measures the purchase of raw materials used in manufacturing, rose at its sharpest rate in almost four years.

Overall inflationary pressures on manufacturers increased last month as the cost of raw materials rose. Prices for oil, plastics and metals all increased, prompting manufacturers to raise prices.

Anecdotal evidence indicated falling orders had led to reduced stock requirements, the report found. NCB chief economist Eunan King said: "Conditions in the manufacturing sector remained challenging in June and are likely to remain so as new orders continue to contract. The deterioration in both domestic and external economic conditions, coupled with the strength of the euro, is adversely affecting demand."

• Global manufacturing activity slipped into contraction for the first time in five years in June, while input prices hit a 10-year high as soaring energy costs continued to bite, a report showed yesterday.

The JP Morgan Global Manufacturing PMI fell to 49.5 in June from May's 50.4. The index combines data from countries including the US, Japan, Germany, France, Britain, China and Russia.