Irish manufacturing contracts in September

Irish manufacturing deteriorated last month as output, new orders and employment levels dropped sharply, according to data released this morning.

The NCB Purchasing Managers' Index (PMI), which measures manufacturing activity, fell to 43.7 from 44.9 the previous month, marginally higher than July's record low of 43.4.

September was the 10th consecutive month the index has been below the 50 mark that separates growth from contraction.

Brian Devine, chief economist at NCB Stockbrokers said manufacturing firms are being squeezed by a drop in both domestic and international demand. "Consequently, output continues to contract, as do employment and new orders."

He said a fall in demand from the euro zone and the UK had hit new export orders and said this trend was likely to continue in the coming months.

This resulted in the new orders index for September falling to a seasonally adjusted 43.4, from 44.1 in the previous month.

New export orders showed a marked contraction last month, falling to 45 from 47.3 in August. This marked the seventh consecutive month in which new orders from overseas declined with survey respondents noting in particular increased competition from Eastern Europe.

With new orders and exports under pressure September became the 10th consecutive month in which more jobs were lost than created in the sector, with the index of manufacturing employment falling to 43.
The report said employment levels at Irish manufacturing firms have fallen every month since last December.

With fewer orders, manufacturing firms addressed their backlogs last month, a move which drove down the levels of outstanding work to a reading of 36.6, compared with 45.9 in September 2007.

Weak demand also hampered the ability of manufacturers to pass on rising raw materials costs for fuel products, steel and energy and this drove down the index of output price inflation to 54.6 last month. This was the slowest pace of output inflation for four months.

However, weak demand saw suppliers' delivery times increase last month to hit a survey record high of 54.7.

Additional reporting Reuters