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Ireland PMI October 2019

Ireland: Business conditions in manufacturing sector return to growth

Business conditions in the Irish manufacturing sector improved in October after deteriorating for four consecutive months. The AIB manufacturing Purchasing Managers’ Index (PMI) rose to 50.7 in October from 48.7 in September, thus moving above the 50-threshold that separates expansion from contraction in manufacturing activity.

Output and new orders both returned to growth in October: Output rose at the swiftest pace since April, albeit marginally, as did total new orders following five consecutive months of contraction. Export sales, however, continued to fall in October, although the drop softened. Firms hired more workers to deal with the increased production requirements, with the rate of job creation rising to a four-month high, thus helping to reduce backlogs of work. Meanwhile, firms boosted their stockpiles of finished goods; some firms indicated doing this to guard against any potential Brexit-induced supply disruptions. On the print front, higher raw material prices lifted firms’ cost burdens, promoting them to raise their selling prices. Lastly, on the outlook, manufacturers were more upbeat in October on expectations of higher output ahead, following September’s series record low sentiment.

Commenting on the latest print, Oliver Mangan, AIB chief economist, stated:

“Brexit related effects remained very evident in the October data. Lower demand from the UK due to Brexit uncertainty was cited as a reason for the continued weakness of export orders. Stock of finished goods continued to rise on concerns that Brexit might impact production. Stocks of raw materials and other inputs also rose on worries about potential supply disruptions if Brexit had gone ahead as scheduled at end October.”

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