HomeBussinessManufacturing here slows on ‘sluggish demand’ despite eurozone rebound

Manufacturing here slows on ‘sluggish demand’ despite eurozone rebound

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A steep drop in export sales, alongside a fall in output volumes, were also reported by companies in the industry last month.

Companies attributed this drop to “sluggish” demand conditions which resulted in a fall in new orders.

Those active in the construction sector pointed to reduced spending among clients, while other sectors pointed to overstocking.

New orders for both domestic and export markets were down, falling at the fastest pace since the December 2022 survey.

Ireland’s manufacturing purchasing managers’ index (PMI) fell to 47.6 from 49.6 in April. Any reading over 50 reflects growth and under 50 shows contraction.

The PMI, based on ongoing surveys with business leaders, is regarded as a good ‘real time’ guide to economic activity.

Ireland’s reading was above the eurozone reading for April, which was at 45.6.

However, it stood below both the UK and the US, which had PMIs of 49.9 and 48.7 respectively.

Meanwhile, data yesterday showed the eurozone economy emerged from recession in the first three months of this year led by a revival in Germany, France and other big economies and helped by a recovery in Ireland.

The rebound was small. First-quarter gross domestic product (GDP) increased by 0.3pc from the previous three months, Eurostat said yesterday.

Growth in Germany, France, Italy and Spain all exceeded analyst expectations.

However, it came at the same time as separate data confirmed that inflation held steady in April, rising at the same 2.4pc pace as in March in line with analyst estimates.

Services sector inflation, which is significantly affected by wages, slowed to 3.7pc in April after five months at 4pc.

The fairly benign euro-area inflation figures are in contrast to the US, where inflation has showed signs of reigniting that has tempered expectations for interest rate cuts there and may have a knock-on effect in Europe in terms of the scale of European Central Bank (ECB) rate cutting this year.

Even so, the ECB, whose president is Christine Lagarde, now looks to be on course to cut interest rates here on June 6 and to follow that up with two or three additional rate cuts over the following months.

Softer inflation and lower borrowing costs should help underpin further growth in Europe, which is currently lagging well behind the US, although significant risks remain including potential fallout from the wars in Ukraine and Gaza.

Those conflicts could upend the interest rates path if they lead to a significant rise in energy costs or disruptions to shipping and supply chains, though so far the economy has managed to ­absorb any such fallout.

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