Manufacturing output in Ireland fell for the first time in 16 months as companies in the sector struggled with a decline in the number of new orders, as well as rising input costs.
The data, which came from the latest survey of the industry by AIB, showed that new orders also declined for the first time since February 2021.
Respondents to the survey said that “steep inflationary pressures” were the factors driving the decline in orders. Export orders also experienced a “particularly sharp decline” as rising costs worldwide dampened international demand.
Oliver Mangan, chief economist at the AIB, said the survey in June revealed “the marked easing of business conditions” in Ireland, as well as “the increasingly negative impact of rising inflation on demand”.
In response to the decline in orders, manufacturers scaled down production last month.
Production was down in the consumer and intermediate goods sectors, but rose for investment goods producers.
Some have used the slowdown in new business as an opportunity to address the backlog of outstanding orders.
As a result, the backlog for the second month was down, the biggest drop since January 2021.
In general, prices rose in June, but at a slower pace than reported in May. Despite this, manufacturers were particularly affected last month by higher costs for energy and transportation.
Suppliers delivery times have also been extended due to stock shortages at suppliers, while some firms have reduced the amounts they ordered due to declining order numbers.
According to the report, manufacturers increased their prices for customers “quickly” in June as cost pressures affected operations.
Manufacturers have remained optimistic that output will increase over the next year, while many also expect new orders to rise. Employment also grew in June despite challenging external factors.
“However, some firms have expressed concern about the impact of rising prices on consumer demand,” he said. Manganese.
“In this regard, the upward pressure on input prices remains intense, with noticeable increases in energy and transportation costs,” he concluded.
Ireland’s Purchasing Manager’s Index (PMI) fell to 53.1 from 56.4 last month, the lowest reading since February last year. Any reading over 50 is considered growth.
The UK’s PMI also recorded positive growth of 53.4 in June, while the overall eurozone index for the month fell to 52.