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Summary
- The survey results published by the AIB and IHS Markit suggest that the Ireland's manufacturing sector picked up strongly in December
- The PMI recorded a five-point rise to 57.2 from 52.2 points during the previous month
The latest survey results published by the AIB and IHS Markit show that the Ireland's manufacturing sector has shown a good growth momentum in December as the businesses prepared for the end of the Brexit transition period by stocking up supplies ahead of the 31 December deadline.
The latest Purchasing Managers’ Index (PMI) from the AIB Ireland recorded a sharp five-point rise in December to 57.2 from 52.2 points in November, representing the sixth overall improvement in the Irish manufacturing sector in the past seven months since the industry reopened.
(Image source: ©Kalkine Group 2021)
The reading for both the months were well above 50, the neutral score which indicates strong growth and expansion since July. AIB said that the 5-point improvement on a month-on-month basis in the PMI reading is the third largest on record for the measure since the survey began.
Both new orders and factory output witnessed a surge that too at the highest rate since the post-lockdown bounce seen in July 2019. With firms looking to expand their inventories in order to protect themselves against the potential disruption following the transition period, raw material purchases accelerated.
Survey details
Like November, all the five components of the PMI moved upwards in December. New orders and output were two of the sub-indices that saw the greatest uplifts, boosting the PMI by 2.0 and 1.7 points, respectively. These two indices were followed by suppliers' delivery times which rose by 0.6 points, employment by 0.4 points and stocks of purchases by 0.3 points.
The Irish manufacturers recorded an increase in new orders received for the second consecutive month in December, and at the fastest pace since July. Improvement in demand and customers placing advance orders were also reported by the firms.
The same trend was there in production, which rose for the second consecutive month in December and at the strongest rate since July. The production has also been aided by an easing of lockdown restrictions, reported some of the firms.
In order to support current workloads and to create safety inventories for 2021, manufacturers build up purchasing operations. The volume of inputs ordered observed the greatest growth since March 2019.
Despite the ongoing effect of the crisis and the UK adopting new trading guidelines, manufacturers remain optimistic about output growth and firms generally expect a recovery in business levels over the course of 2021.
Oliver Mangan, the Chief Economist of AIB, said there was a strong rise in new orders, which has resulted in a marked rise in production. In his opinion, the growth partly came due to customers’ fear of the expiry of Brexit transition timeline.
Nevertheless, Mangan said that the supply chains remained under pressure, with shortages in raw materials being reported by the manufacturers as well as delays in deliveries driven by the congestion at ports and on roads.
