Business conditions in the Irish manufacturing sector improved markedly again in May. The latest NCB Purchasing Managers' Index rose to 54.5 in May, from 53.9 in April, the highest level in almost two years.
The index is designed to provide a single figure measure of the economic health of the manufacturing industry. The index remains above the critical 50 no change mark that divides growth from contraction for the ninth successive month.
However, there was also a substantial increase in the rate of input cost inflation last month. This was due to strong demand, a shortage of supply, increasing supplier pricing power and surging oil prices.
NCB said the latest improvement in business conditions was driven by a further rise in the overall volume of new orders placed with manufacturing firms in May. Firms attributed higher new orders to strengthening demand conditions in both domestic and international markets.
Demand from the US was noted as being particularly strong, although there was also a rising volume of orders from the European market.
May's survey data pointed to another expansion of manufacturing employment. However, the rate of growth of staffing levels was almost negligible as the vast majority of firms maintained the size of their existing workforces.
'As well as nine successive months of expansion in manufacturing, the May survey marks the PMI's highest level in almost two years,' commented Dermot O'Brien, Chief Economist at NCB Stockbrokers. He added that the readings on manufacturing output and new orders have not been bettered since Spring 2000.
'Along with the better results for manufacturing activity, however, there was a sharp pickup in both input and output price inflation in May, in part reflecting the impact of higher oil prices,' he said.
