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Ireland PMI August 2020

Ireland: Manufacturing PMI drops in August as rebound loses momentum

The AIB manufacturing Purchasing Managers’ Index (PMI) dropped from July’s near two-year high of 57.3 to 52.3 in August. However, the index remained above the 50-threshold that indicates improving business conditions, although the result suggested that the recovery lost some momentum.

August’s reading largely reflected manufacturers’ concerns around the wider economy amid the ongoing Covid-19 pandemic. Production and new orders expanded at a notably softer rate compared to the previous month. For its part, employment fell in August, after having risen for the first time in six months in July. However, the rate of job shedding was weaker than that logged in the March–June period. On the price front, input costs rose in August amid raw material shortages, while output charges decreased as firms attempted to sell off old stock. Lastly, although confidence among manufacturers remained optimistic, worries over a second wave of coronavirus cases and the long-term economic impact of the pandemic weighed on output expectations, which fell to a three-month low.

Commenting on the reading, Oliver Mangan, AIB chief economist, reflected:

“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. The Irish PMI of 52.3 for August lies between the flash readings of 51.7 for the Eurozone and 53.6 for the US and so is broadly in line with data elsewhere. […] Overall, the August PMI data show that the recovery in manufacturing activity is continuing, but firms remain very cautious amid heightened uncertainty about future demand and general business conditions.”

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