Manufacturing activity surge drives PMI to record high
Conditions in manufacturing improved vastly in the month of April bringing AIB’s monthly measure of activity in the sector to a record high.
The Purchasing Managers’ Index – or PMI – is a composite, single-figure indicator of manufacturing performance derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
Activity is measured on a scale of 1 to 100 with any figure greater than 50 pointing to expansion in a particular sector.
The measure rose sharply in April to 60.8, from 57.1 in March, indicating a rapid improvement in manufacturing business conditions in Ireland in the month.
That figure was the highest ever recorded since the survey began in May 1998, surpassing the previous peak of 59.1 set in December 2017.
The outcome was largely mirrored across the euro zone where activity has been bouncing back after the slowdown brought about by the pandemic.
IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) rose to 62.9 in April – also the highest in the series history – boosted by growing demand and driving a rise in hiring.
While a third wave of coronavirus infections in Europe has forced some governments to shutter much of their dominant service industries, factories have largely remained open.
The AIB PMI was elevated by another severe lengthening in suppliers’ delivery times.
Input price inflation reached the second-highest rate ever, prompting firms to hike their own prices at a record pace, the report concluded.
“Supply chains remain under severe pressure, with longer delivery times owing to new UK Customs arrangements, transport delays and raw materials shortages. These factors, combined with strengthening demand, are leading to a heightening of inflationary pressures,” Oliver Mangan, chief economist with Ulster Bank said.
“Input prices increased at their fastest pace in ten years, while output prices rose at a series-record pace,” he added.
With demand and output rising, Firms added to workforces at the fastest rate since December 2017 due mainly to the higher demand and the rise in output.
Higher employment also reflected the return to full hours for some existing staff, the report said.
The 12-month outlook for production also hit a record high.
“Firms widely expect vaccination programmes to allow a full reopening of economies, providing a major fillip to business activity,” Mr Mangan said.