Irish manufacturing picks up despite currency swings

Irish manufacturing output picked up in November, with the pace of export growth in particular accelerating.

The data, showing the fastest growth in eight months, suggests Irish industry is adjusting relatively well to the big swings in the currency market since the June Brexit vote.

In contrast, British manufacturing growth cooled unexpectedly in November as factories grappled with soaring costs caused by sterling’s slump after the vote to quit the EU, even before this week’s jump in oil prices.

The latest Investec Manufacturing PMI for Ireland shows faster rises across all of the main segments looked at by the survey – Output, New Orders and Employment.
The PMI is based on an extensive survey of industry managers, and its results are collated into a standard index where a reading from 50 up shows growth and a reading under 50 marks contraction.

Investec chief economist Philip O’Sullivan said the highlight in November was a marked improvement in the New Export Orders component, with panellists reporting increased demand from customers in Asia, Europe and the US.
The upsurge in demand also generated the biggest ever increase in backlogs of work recorded in the series (which dates back to September 2002).

That may be a sign that some orders kept on hold since the UK’s Brexit vote were put in motion in November, Investec said.
As a result of increased client demand, Irish manufacturers stepped up both their own purchases and activity on the hiring front.

In contrast, data yesterday showed British manufacturing growth cooled.
The weak pound failed to boost exports by as much as in previous months.

Britain’s economy has performed much better than expected since June’s vote to quit the EU.
But a bigger test will come next year when inflation is expected to rise sharply, eating into households’ spending power.

The PMI’s gauge of prices paid by factories for materials and energy shot up at a rate just shy of October’s near six-year high, while prices of finished goods again rose sharply.
Export growth, however, waned further from September’s five-and-a-half year high.

Wednesday’s 10pc surge in crude oil prices – after Opec and Russia agreed to restrict production – pushed the dollar cost of oil close to levels not seen in 18 months, and drove home the cost pressures facing British manufacturers.
“Once again, price growth is the key story from this reading,” said HSBC economist Elizabeth Martins, who warned the spike in oil prices risked further aggravating factory costs.

“For the manufacturing sector, this is not good news, undermining the positive effects from weaker sterling on competitiveness.”

The UK’s PMI’s headline index fell to 53.4 from 54.2 in October, undershooting expectations for a rise to 54.5 in a Reuters poll of economists.
“The trend in new orders for investment goods such as plant and machinery has eased sharply so far in the fourth quarter,” Rob Dobson, a senior economist at IHS Markit, added. (Additional reporting Reuters)

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