1/09/2011: Manufacturing PMI for Ireland - a mixed bag for August

Figures for PMIs for Euro area economies released today are hardly encouraging:

• German manufacturing index stands at 50.9 in August, close to contraction, against the local peak of 62.7 in February 2011
• Spain's August data shows fastest fall in output since June 2009, with headline PMI at 45.3.

Now, Irish manufacturing PMIs (released today by NCB) are showing no clear direction from the contraction momentum established in July.

Here are the updated figures:

• Core PMI for manufacturing remains in contraction territory for the third month in a row at 49.7 in August, although the index is marginally up on 48.2 in July. Index 12 mo MA is at 52.2 and 3mo MA is now at 49.2. 2010 same-period 3mo MA is 51.4 against 2009 same period 3mo MA of 43.4. This does not square well with the ESRI assertion that stronger economic performance might emerge in H2 2011.
  
• Output sub-index is out of contraction territory in August (52.4) compared to July (49.8), breaking two consecutive months of contraction.
• New orders sub-index, however, is now at 47.7 down from 47.9 in August, marking the lowest point since September 2010. 3mo MA is now at 48.1 and 12mo MA at 52.7. Per NCB analysis: "The decline in business conditions in August mainly reflected a solid reduction in new orders. Panellists indicated that slowing demand had been behind the contraction in new business, which was the fastest since September 2010".
• In contrast to overall new business measure, sub-index for new export orders increased in August to 53.5 since July 51.3. This marks the eleventh successive month of the index being above 50 expansion marker and the first rise since January 2011. However, August reading was still below the local peak of 61.6 attained in February 2011 and stands well below 12mo MA of 55.7, with 3mo AM of 52.1. New exports demand grew, according to the respondents, in aprticularly strongly in the UK.
  
• Backlogs of work in August were reading 41.7, up on 41.1 in July. The fall in overall new business in August drove this further decline in backlogs of work as companies transferred spare capacity to work on existing projects. This is now the sixth successive reduction in outstanding business and the reduction was substantial.
• August responses pointed to a further and sharper reduction in stocks of finished goods with the sharpest rate of stocks depletion since March - down to 45.2 in August from 49.6 in July. Per NCB: "Post-production inventories have now fallen in each of the past 40 months. Panellists reported that they had made efforts to reduce stock holdings over the month."
• After falling for three successive months, employment increased during August, with the rate of job creation being extremely shallow at 51.1 in August, up from contraction in July of 49.1 and breaking three consecutive months of declines.

Last point to make comes from the final chart above: profit margins have deteriorated in August once again from -15.01 to -15.62 as input prices continued to expand at 58.9 in August, down from 59.3 in July, while output prices switched into contraction territory with a reading of 49.7 in August down from 50.4 in July.