Irish manufacturing has contracted for the third consecutive month, according to the latest survey of purchasing mangers. The NCB purchasing managers index also showed the sharpest contraction of activity in October since data was first collected in May 1998.
The index, which gives an overall view of the sector, fell to 46.1 in October from 47.7 in September. Readings above 50 signal growth and those below 50 signal contraction.
According to NCB chief economist Mr Dermot O'Brien, the continued contraction was not surprising given the uncertain international environment and the index's reliance on multinational exporters. The survey is based on the responses of 285 manufacturing companies and is carried out in association with the Irish Institute of Purchasing and Materials Management.
Almost all the components of the index showed contraction. Overall new orders fell for the third successive month with the rate of decline in demand the sharpest in the survey's history. Employment also fell at the fastest rate in the survey history.
Export orders were also hard hit and showed a contraction in foreign demand for the sixth month running.
Firms said their shrinking order books were the result of deteriorating economic conditions in both domestic and international markets. A number of firms said the adverse effects of the terrorist attacks in the US had compounded the slowdown in global demand already taking place.
According to Mr O'Brien, the figures show a marked impact of the events of September 11th.
However, he added that November and December data will be needed before it becomes clear whether the economy is in the middle of a pronounced slowdown or whether there will be a rapid bounce back.
"We will probably see a similar pattern in European figures when they are published today as manufacturing decelerates very sharply across the euro zone."
Irish firms also cut output for the second month running and at the fastest rate seen so far in the survey.
With production down markedly the overall quantity of raw material purchased fell for the fourth consecutive month, while the rate of contraction was once again the fastest since the survey began. Firms also said they were deliberately destocking to reduce overall costs.
Supplier delivery times continued to shorten in October as weaker demand for many manufacturing inputs further eased the pressure on suppliers' capacity. However, there was some good news on the inflation front.
Suppliers also responded to the reduced demand by further reducing prices leading to a fall in overall input costs for the third month in a row.
The rate of input price deflation was even quicker than in September in line with weakening oil prices.
