The manufacturing sector experienced some renewed headwinds in September which saw the index going back into contractionary mode having bounced back in August.
The headline AIB Ireland Manufacturing Purchasing Managers Index – a composite single-figure indicator of manufacturing performance – fell to 49.6 in September from the six month high of 50.8 recorded in August.
Any measure above 50 signals expansion in the sector while anything below 50 signals contraction.
New orders fell at the fastest pace so far this year in September, following a brief rebound during August.
“Subdued global demand conditions and customer destocking were factors holding back new business intakes,” the report noted.
“As a result, export sales resumed their downward trend in September, largely driven by falling spending by European clients.”
On a more positive note, a solid pace of job creation was maintained and manufacturers remained upbeat about growth prospects for the year ahead.
The September report also highlighted a marginal reduction in output volumes across the manufacturing sector as production schedules adjusted to subdued demand patterns.
Oliver Mangan, Chief Economist with AIB, noted that while there was a contraction in activity in September, the overall PMI remained above the average of 49.1 recorded in the first half of 2023.
“Firms reported that destocking by customers and subdued global economic conditions weighed on demand. There was only a marginal decline in manufacturing production, though, with firms continuing to work through order backlogs, which helped maintain output levels,” he noted.
“There was also a further appreciable easing of inflationary pressures in the sector. Input prices declined for the sixth consecutive month, helped by falling raw material and energy costs,” he added.
“The drop in input costs continued to be passed on in lower factory gate prices, which fell markedly at their quickest pace in nine years,” Mr Mangan concluded.