Wednesday, August 1, 2012

1/8/2012: Manufacturing PMI for Ireland: July 2012

In the previous post I highlighted the relative performance of Irish manufacturing PMI for July compared to other countries (link here). In this post, let's take a look closer at the Irish Manufacturing data.

July Manufacturing PMI for Ireland came in at 53.9 - up on 53.1 in June, signaling strong and accelerating expansion in the sector. This marks the strongest reading in 15 months (PMI registered 56 in April 2011). More significantly, PMI has now been above 50 (expansion territory) for 5 consecutive months.

Dynamics are also encouraging: 12mo MA is now at 50.2, 3mo average through July is at 52.7 up on 3mo average through April 2012 of 50.4, up on comparable period of 2011 (49.4) and even on same period of 2010 (53.1). 6mo MA is at healthy 51.6. All readings are above historical average of 51.0.

However, headline PMI is still statistically not significant as chart below illustrates:

One positive in the above is that the series on core PMI, Output, New Exports Orders and New Orders have broken out of the flat pattern set June 2011 and are now expanding at significantly higher rates.

  • New orders sub-index rose to 55.8 - very strong reading, given the 12mo MA of 50.2 and statistically significant. This too marks the highest reading since April 2011.
  • Output sub-index is now at 54, down slightly on 54.6 in June, but still strong positive reading and also statistically significant. Output has now expanded for three consecutive months and is running ahead of 12mo MA and 6mo MA. 3mo average is ahead of previous 3mo average. All dynamics are strong and positive.
  • New exports orders sub-index posted massive jump to 56.7 from 52.5 - marking the first statistically-significant reading in 4 months. This sub-index is now in expansion mode for 6 consecutive months.

Alas, the rest of the series are less impressive:

What worries me in the data above, though the word 'worries' is a bit too strong here, given the impressive numbers generated, are the following trends:

  • Output prices have fallen 47.0 while input prices have declined 47.8 in July which suggests that profit margins have dropped.
  • Increased production levels drove down the backlogs of work, despite increases in new orders.
  • Increased output also drove up increases in purchasing of inputs (imports).

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