Conditions in the manufacturing industry deteriorated at a record pace in October, with output, new orders and employment shrinking at the fastest rate in the past ten years.
The NCB Purchasing Managers' Index (PMI), which measures manufacturing activity, slipped to 39.7 in October from 43.7 in September. This was a new low since the start of the survey in May 1998.
NCB said that September was the 11th month the index has been below the 50 mark separating growth from contraction after over four years of sustained expansion.
NCB said the lack of demand was the main reason for the fastest recorded decline in manufacturing production. Output has fallen every month since March.
New orders also fell at a record pace. The index revealed that the global economic downturn made it harder for manufacturers here to secure new orders from aboard. The UK market was said to be especially weak.
In response to reduced output requirements, businesses cut their workforces with around 30% of manufacturers reporting lower employment levels. Staffing levels have now fallen every month since December 2007.
However, both input prices and output price inflation slowed in October, with input prices rising at their weakest pace since December 2003 as the price of oil fell substantially.
'The October contraction in manufacturing is not a huge surprise, however the magnitude of the drop was unexpected,' said Brian Devine, chief economist at NCB Stockbrokers. 'The most worrying aspect of the report was that both new orders and new export orders deteriorated sharply,' he added.
'The economy is set in for a sharp contraction in Q4 2008 as both domestic and external demand weigh on GDP,' the economist warned.
