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Manufacturing posts sharpest ever monthly drop in March

Factory activity here posted its sharpest ever monthly drop in March as the coronavirus pandemic disrupted supply chains and caused a collapse in demand, a survey showed today. 

The AIB IHS Markit manufacturing Purchasing Managers’ Index (PMI) fell to 45.1 from February’s 51.2, its worst reading since May 2009.

The figure was also well below the 50 mark that separates expansion from contraction. 

The month-on-month drop, at 6.1 points, was the largest since the survey began in May 1998, surpassing the 5.7 point fall recorded in February 2009 as the global financial crisis raged, the survey’s authors said. 

The new orders sub-index plunged a record 14.1 points to 38.2 from 52.3 in February, while the 12-month outlook for production was the worst on record. 

Today’s index also showed that manufacturing employment declined for the fourth time in five months in March, while the rate of job cuts at the sharpest pace since July 2009. 

Firms blamed job losses on cancelled projects, a lack of activity and difficulties finding replacements for leavers. 

“The PMI data confirm that there was an abrupt and steep fall in manufacturing in March,” AIB’s chief economist Oliver Mangan said. 

The economist said the impact of the virus was not just seen in falling orders and output, but pointed out that employment in manufacturing fell at its fastest pace since July 2009. 

“Purchasing activity also declined at the quickest rate since September 2011. Cancelled orders and weak demand saw depleting levels of outstanding business as firms worked
through backlogs,” Oliver Mangan said. 

“There were also unprecedented delays in the delivery of inputs as a result of disruptions to global supply chains. Meanwhile, both input and output prices fell marginally on
weakening global trends,” Mr Mangan said.

He also predicted that further sharp falls in the PMI are likely over the next couple of months – the Irish index troughed at below 35 during the last recession in 2008-09. 

Noting that new orders collapsed in March, he said that signalled that further declines in output are on the cards.

“Worse is to come, but there is also scope for a sharp rebound in activity when the coronavirus pandemic abates,” the economist added. 

A six-year expansion in manufacturing came to an end in June as a slowdown in global trade and uncertainty over Brexit finally caught up with manufacturers in the bloc’s fastest-growing economy.

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