December sees the sharpest decline in Irish manufacturing volumes for six months
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Sustained reductions in new orders have led to the fastest drop in Irish manufacturing in six months.
The AIB Manufacturing Purchasing Managers' Index (PMI) for December fell to 49.1 from 49.9 in November. Any figure below 50 shows a contraction. December marks the second consecutive month of contraction and means activity has fallen in eight months throughout 2024.
According to the survey, factories reported lower production requirements due to unfavourable demand conditions. Some firms also cited efforts to streamline their post-production inventories.
Weak export markets were a further headwind to sales pipelines, mostly due to lacklustre economic conditions in the UK and euro area.
"The decline in December was due to weakness in output, new orders, and purchases," AIB's chief economist David McNamara said, adding the Irish PMI remains above the December readings for the eurozone, US and UK.
The survey showed costs increased at a solid pace in December, with the rate of inflation edging up from the five-month low seen in November. Manufacturers noted higher prices paid for a range of raw materials, as well as greater transportation costs.
There were positive trends in terms of staffing. The survey indicated a rise in employment for the first time in four months, although the rate of job creation was only marginal. Greater workforce numbers were attributed to long-term business investment plans, new project starts, and hopes of a broader turnaround in customer demand.
"Exports were particularly soft, with the UK and eurozone cited as key drivers of the decline in December," Mr McNamara said.
"Despite the muted demand backdrop, hiring moved back into expansionary territory for the first time in four months, as firms planned for new projects and investment plans. However, despite the positive signs on employment, purchasing activity and stock building by firms continued to fall in December."
There was also strong optimism regarding the outlook for business activity over the next 12 months. About half of the 250 firms surveyed anticipate a rise in production volumes, while only 6% foresee a decline.