Investec Manufacturing PMI Ireland August 2018

The latest Investec Services PMI report shows that the sequence of growth for the sector now extends to six years.

While the headline PMI has moderated to a four month low of 57.4 (from June’s 59.5), it is still consistent with a sharp rate of expansion in activity.

The report also illustrates strong growth in demand, with the New Orders and New Export Business components both pointing to substantial expansion in client orders. In terms of overseas business, panellists mentioned the UK, India, France and the Netherlands as particular bright spots last month.

Companies are, predictably, responding to this by adding to headcounts. The Employment index recorded its 71st successive above-50 reading. However, despite these additional resources, Backlogs of Work increased again (as they have in every month since May 2013).

Turning to margins, Input Costs rose sharply once again last month, with panellists blaming higher beverage, fuel, insurance and rent costs for this latest increase. A number of firms also indicated that salaries and wages had been raised due to a higher cost of living and efforts to retain staff. Companies raised Output Prices in response to these cost pressures, a move that helped the Profitability index accelerate at the fastest pace seen in 2018 so far.

The forward looking Business Activity: Expected Levels in 12 Months’ Time index slowed to a four month low, although nearly half of panellists expect to see output growth over the coming year. Unadjusted data for the segments of the services industry that are captured by this report (Business Services, Financial Services, TMT and Transport & Leisure) show that confidence is highest in the technology space, as has been the case now for almost a year and a half. Given that this sector has contributed 37% of Dublin office take-up in the past five years, it is particularly encouraging to see such optimism.

Taken together, this week’s PMI releases suggest that while the rate of growth in activity across much of Ireland’s private sector has slightly softened from the multi-month highs recorded in June, it remains substantial. We expect the Irish economy to grow by 5.0% in GDP terms this year, keeping the country towards the top of the EU28 ‘growth charts’.

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