The pace of growth in the manufacturing sector slowed sharply to a three-month low in January as Britain’s exit from the European Union’s trading orbit combined with Covid-19 restrictions hit output and new orders.
The AIB IHS Markit manufacturing Purchasing Managers’ Index (PMI) dropped to 51.8 from 57.2 in December.
While the index was still higher than the 36 recorded during the initial lockdown of the economy in April, output and new orders both posted their second-sharpest falls in its history last month.
Stockpiling ahead of the introduction of additional customs procedures for trade with Britain at the start of the year boosted December’s numbers and hit those in January, AIB said.
A lengthening of delivery times to the second-longest on record and sharp growth in input stocks helped keep the index above the 50 level that separates expansion from contraction for the eighth month in a row.
“Although the PMI remained above 50 and thus stayed in expansion territory in January, the main components of the survey point to marked underlying weakness in the sector,” AIB’s chief economist Oliver Mangan said.
Ireland has extended its current COVID-19 lockdown, its strictest since the first one last spring, to March 5 and has said it will only lift the measures on a slow, phased basis with.
Construction is likely to be among the first sectors to reopen.
But the survey found that expectations of the release of pent-up demand in the second half of 2021 pushed up output expectations for the coming 12 months to their highest level since May 2019.
“Firms have become very optimistic about the 12-month outlook for production,” Oliver Mangan said.