The June 2018 PMI report on manufacturing output from Investec shows that the sector finished strongly in the second quarter, with the Purchasing Managers Index up 1.2 points at 56.6.

Economist Philip O’Sullivan said that the index was a five month high based on higher client demand. New orders received were the best seen in 2018 so far, with higher growth from both domestic and overseas customers, he added.

Employment increased in tandem with demand, and the index recorded a 14th month of rising backlogs of work and depleted stocks as manufacturers scrambled to meet orders.

Pressure on costs continued to increase, with price rises for aluminium, steel, oil, plastics and timber all cited by panellists which could not entirely be offset by price increases, so that June turned out to be the fifth successive survey month in which the profitability index recorded a sub-50 reading.

Business continued optimistic, however, with around 55% of firms expecting a rise in production over the coming year, with this assessment based on the anticipation of stronger growth in export markets in particular. 

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O’Sullivan said: “With global growth expected to remain close to 4% per annum into the medium term, we think this optimism is well founded.”

New business from abroad increased markedly, albeit at a slightly slower pace than in May. As a result, production increased for the 23rd month in a row. “Manufacturers took on extra staff in June as part of efforts to meet customer demand. Employment increased for the 21st successive month. The latest rise was solid and quicker than seen in the previous month. Investment goods signalled the sharpest rise in employment of the three broad sectors covered."

The Investec Services PMI for June  shows that the rate of growth in activity has improved to a five month high. Investec said the improvement was driven by stronger client demand, with the New Business index reversing almost all of the moderation seen in May. This appears to have been mainly driven by domestic clients, as the rate of expansion in New Export Business cooled in June.

Services companies responded to the increased demand by adding to headcounts at the fastest pace seen in 2018 so far. On the margin side, there was another sharp rise in Input Costs in June, with higher energy, insurance and salary costs said by panellists to be behind this. Firms were able to pass on at least some of this increase by upping Output Prices once again.

The forward looking Business Expectations index strengthened in June, pointing to greater optimism by services companies. "Allied to the increase in employment growth to the fastest pace in the year to date, it is clear that Irish services companies are upbeat on the prospects for the sector. Given the positive international backdrop, we share this optimism," said economist Philip O'Sullivan.