Growth in the manufacturing sector slowed through August in the face of weakening demand and further job cuts.
AIB’s latest Purchasing Managers’ Index dropped from 57.3 in July to 52.3 in August. While the August PMI is the second-highest reading in 16 months, the month-on-month drop reflected a loss of momentum in manufacturing activity growth.
New orders rose for the third consecutive month in August and the rate of expansion was the second-strongest since March 2019, albeit slowed markedly from July, according to AIB.
New export orders showed a similar trend to total new work, rising for the third straight month but at a much slower rate than in July.
Manufacturing output rose for the third month running in August, the longest sequence of sustained growth in 16 months. The rate of expansion was strong compared with historical data but again had slowed notably from July.
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Manufacturers remained confident of growth in output over the next 12 months in August, with positive sentiment maintained for the fourth straight month. Optimism has been tempered, however, by the prospect of a second wave of Covid-19 and concerns about its long-term impact on the economy.
Subdued sentiment and the slowdown in new business was reflected in firms’ hiring decisions in August. Having risen in July for the first time since January, manufacturing employment declined in the latest survey period; however, the rate of job shedding was slower than those registered in the March-to-June period.
Purchasing activity also declined in August, having rebounded in July. According to AIB, this reflected ongoing efforts to minimise stock levels as demand conditions remained highly uncertain.
Purchase prices rose through August, although prices charged by manufacturers declined as they attempted to sell off old stock.
Commenting on the August PMI, AIB chief economist Oliver Mangan (pictured) noted that the decreased reading was still consistent with improving business conditions in the manufacturing sector.
“The loss of momentum in August is not surprising given the pick-up in new coronavirus cases over the past month, both in Ireland and elsewhere, and the continuing very uncertain economic outlook,” Mangan added.
