Brexit preparations saw the Irish manufacturing sector record a boost in business through December, according to AIB. The AIB Ireland Manufacturing Purchasing Managers’ Index (PMI) rose sharply from 52.2 in November to 57.2 in December – the strongest growth since July.

According to AIB, the five-point rise in the headline figure was the third-largest on record since the survey began, behind only those registered in June and July as the sector reopened following the first coronavirus lockdown.

The headline PMI indicates manufacturing performance based on a composite of metrics tracking new orders, output, employment, suppliers’ delivery times and stocks of purchases.

New orders and output in the Irish manufacturing sector through December both rose at the fastest rates since July's post-lockdown bounce, while purchasing accelerated as companies sought to expand inventories to guard against a potential hard Brexit.

Businesses also reported improving demand and advance orders placed by customers preparing for potential disruption following the end of the Brexit transition period. Some companies also reported that production had been aided by an easing of lockdown restrictions.

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Shortages of raw materials and rising demand contributed to another round of input cost inflation in December, according to AIB’s research. The rate of inflation was slightly softer than in November, but still the second-fastest of the past 22 months.

Meanwhile, manufacturing output prices rose in December for the third consecutive month and at a rate that remained above the long-run series average.

Manufacturers were optimistic regarding output growth over the course of 2021. Sentiment eased slightly since November, partly reflecting rising uncertainty surrounding a UK-EU trade deal, but was still the second-highest for 10 months.

Companies surveyed for the December PMI generally expect a recovery in business levels in 2021, despite the ongoing impact of the pandemic and a new UK trading relationship.

Commenting on the December PMI, AIB chief economist Oliver Mangan said that the results chimed with global manufacturing sector trends. “The flash manufacturing PMIs rose to 57.3 in the UK and 55.5 in the Eurozone in December, so the strong Irish figure is not out of line with elsewhere.”