Manufacturing output in Ireland fell for the second consecutive month in July as order book volumes declined at their fastest pace since January, according to the latest AIB Ireland Manufacturing PMI.
Panellists blamed the decline -- which was greater than that registered in June -- on rising costs, with firms increasing their prices again last month in response to greater cost burdens.
The PMI registered 51.8 in July, down from 53.1 in June, and while still above the no-change level of 50.0, it was the slowest rate of improvement in the health of the manufacturing sector since January.
Factory production declined for the second month running, with the pace of reduction accelerating from June, and panellists linked the latest fall to weak client demand, but the fall in output was only marginal overall.
New orders further contracted last month, again at the quickest rate since January, and outpaced the declined in output, reflecting higher prices and order book volumes from abroad, as new export orders fell marginally.
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Elsewhere, factory gate charges rose again in July at the fifth-quickest rate on record, with firms reportedly hiking prices amid efforts to pass greater cost burdens onto customers as input prices increased markedly again.
At the same time, Irish goods producers reduced their buying activity for the first time since February due in part to lower production requirements, although pre-production inventories increased again as panellists sought to build safety stocks.
The rate of increase was the fastest for six months and strong overall, while stocks of finished goods rose for the first time in over a year.
Concurrently, average supplier delivery times lengthened again in July due to material shortages and transport delays, although delays were the least widespread since November 2020.
Staffing levels at Irish goods producers rose at a moderate rate in July, albeit at the slowest rate of job creation since February, reflecting reduced capacity pressures as backlogs declined for the third successive month and at a sharp pace.
Looking ahead, Irish manufacturers remained positive overall towards the outlook for output over the next 12 months, with optimism ticking up to a three-month high.
However, the level of sentiment remained historically subdued amid concerns around the near-term economic outlook.
"The fall was in line with the trend seen elsewhere - the flash July index fell to 52.2 in the UK and dropped to 49.6 in the Eurozone," said Oliver Mangan, chief economist at AIB Ireland, of the overall PMI.
"The impact of weakening demand on Irish manufacturing activity was most evident in the second consecutive monthly contractions in both output and new orders. The drop in new orders resulted in a further easing in capacity pressures, as evidenced by declining backlogs for a third month running.
"Weakening demand also saw stocks of finished goods rise for the first time in over a year," he added.
"The overall headline PMI was supported by a further rise in employment, albeit at the slowest pace since February 2021, as well as a solid increase in stocks of input purchases. There was also a continued lengthening of supplier delivery times, amid reports of shortages of materials and transport delays.
"In terms of the 12-month outlook, sentiment remained positive, though it is at a subdued level on a historical basis. Meanwhile, inflationary pressures remain pronounced, with prices rising at close to their fastest pace since the survey began in 1998. There were further marked increases in material, energy and labour costs, while the rate of output price inflation remained elevated."
