Manufacturer slowdown starts to hit jobs market
Jobs growth in manufacturing stalled for the first time since 2016 this month. A fourth consecutive month of weaker manufacturing conditions has started to feed through to weaker hiring data, according to a survey.
AIB’s Manufacturing Purchasing Managers’ Index showed a drop in new orders led to a further decline in output, with the index posting a reading of 48.7 in September.
“As a result of the setbacks in output and new work, employment among Irish manufacturing firms was unchanged from August,” AIB said.
“This marked the first time since September 2016 that employment had failed to rise.”
Purchasing manager surveys give an early insight into economic conditions well ahead of official data, and a reading below 50 indicates a contraction from the prior month.
Despite the weaker numbers, Ireland is still doing better than the eurozone, where the PMI reading for August dropped to 45.6.
While sentiment indicators, like the PMI series, have been showing weakness, so-called ‘hard’ economic data readings have remained relatively resilient, even in the eurozone.
Ireland’s economic growth was 6pc in the first half of this year, following a reading of 8.2pc in 2018, and most economists now expect it to outperform official forecasts of around 4pc for this year.
The weakening outlook recorded in the PMIs here has also seen work backlogs fall off sharply. Work outstanding decreased at its sharpest pace since July. “The weak Irish data of recent months clearly show that the sharp slowdown in global manufacturing over the past year or more is being felt in Ireland also. Brexit uncertainty is an additional negative factor weighing on activity here,” said AIB’s chief economist Oliver Mangan.
He added: “Meantime, sentiment among Irish manufacturers regarding future output, while still positive, fell to its lowest level in the seven-year history of the survey, as Brexit concerns mount.”
Irish exports are more heavily geared toward the United States, which is still growing at 2pc and where the Federal Reserve has far more room to cut interest rates than the European Central Bank. ECB policy rates are still pinned at zero a decade after the onset of the financial crisis.
Credit ratings agency S&P last week said it expected the eurozone to grow by just 1.1pc next year. It said governments needed to do more to boost the economy, as further cuts in ECB policy rates and a new bond buying programme would not be sufficient to rekindle growth.
The call was backed by outgoing ECB president Mario Draghi in an interview with the ‘Financial Times’.
Mr Draghi said that without help from government spending, ECB policies would be less effective, in a message aimed squarely at governments such as Germany and the Netherlands.
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