Conditions in manufacturing sector hit three-month high

Overall business conditions reached a three-month high in the manufacturing sector during May, according to the latest PMI report from Investec.

The headline PMI ticked up to 55.4, from April’s 55.3 reading. The 50-mark separates contraction from growth.

A key positive from the latest survey was a marked acceleration in the rate of growth in new business, which rose at its fastest pace since January amid stronger demand from both home and abroad.

Despite this stronger demand, “backlogs of work” rose only modestly. This was, according to Investec, “largely due to the utilisation of inventories to meet customer orders” as the rate of increase in the employment index slumped to an eight-month low.

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The report also shows that inflationary pressures remain “very high” for Irish manufacturers, with the latest rise in input costs driven by rising oil, plastics and metal prices.

“Companies were, however, able to pass some of this cost pressure on to end-customers, but this wasn’t enough to prevent a fourth successive sub-50 reading for the profits index,” according to the report.

“Notwithstanding this margin pressure, firms remain very upbeat on their prospects, with close to three-fifths of panellists expecting to see a rise in output over the coming 12 months,” it says.

“This confidence was linked to expectations of increases in new orders, particularly from overseas. Given the supportive international backdrop, we think this optimism is warranted.”