Persistent Growth in Manufacturing Sector, Despite Export-Related Hurdles, According to PMI Data
Reimagined Article:
The Irish manufacturing sector's momentum remains strong, recording growth for the fifth month in a row in May, despite a minor dip in the PMI compared to April. AIB's survey revealed a slighter drop from 53.0 to 52.6, but the sector remains in expansion territory, defying the 50-mark.
This stretch of growth is the longest the sector’s seen in almost two and a half years. The key driver behind this growth has been the robust domestic demand, which bolstered new orders, while export orders took a slight hit due to a decline in sales to the US and Britain. The decline in export orders represented the fastest pace of contraction in five months, with manufacturers reporting cautious US clients and sluggish British sales.
New export orders have struggled to gain traction since mid-2022, showing growth only five times over that period. The Department of Finance recently revised its economic growth forecasts, predicting 2% growth if a 10% tariff on EU exports to the US persists, or 2.5% if tariffs are removed.
The survey demonstrated a slight easing in input price inflation, though pressure on costs remains high due to agricultural, commodity, and raw material price increases. The appreciation of the Irish currency against the US dollar helped alleviate some import price pressures. Employment indicators show that hiring increased at its fastest pace since January, with around 39% of firms anticipating increased output in the coming year, while 9% foresee a decline.
In today's economic climate, characterized by global uncertainty and potential trade tensions, managing risks and promoting domestic resilience is key for sustained growth. Irish manufacturers must navigate this challenging landscape while seeking opportunities to improve productivity and invest in infrastructure. Despite these obstacles, Ireland's manufacturing sector is displaying remarkable resilience and is poised for continued growth if it successfully navigates the complexities of the global landscape.
Enrichment Insights: Ireland's GDP is expected to increase by 3.4% in 2025 and 2.5% in 2026, supported by a robust labor market. The manufacturing sector, while experiencing growth, faces global uncertainties and trade tensions, especially due to its heavy reliance on exports to the US. Higher tariffs could significantly impact Irish exports and fiscal stability. Prioritizing productivity-enhancing reforms and investing in infrastructure could help mitigate external risks and support long-term growth.
- The manufacturing sector's growth in Ireland is partially funded by the finance sector, as businesses invest in infrastructure to improve productivity and navigate global uncertainties.
- The Irish manufacturing industry, despite its robust domestic demand, is heavily dependent on foreign business, especially exports to the US, making it vulnerable to potential trade tensions and higher tariffs in the finance realm.
