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Pace of recovery in Irish manufacturing slips as spike in Covid-19 cases 'rattles' business sentiment in August

Recent lockdowns in Kildare and the midlands weighed heavily on the data.

Image: Liam McBurney

ECONOMIC CONFIDENCE REGRESSED in August after improving in the early summer, according to the latest industry and consumer surveys.

AIB’s manufacturing purchasing managers’ index (PMI) dropped slightly last month after reaching a near two-year high in July following the lifting of restrictions and the reopening of large parts of the economy in the early summer.

Elsewhere, Bank of Ireland’s monthly Pulse survey, released on Monday, also fell back in August after three months of consecutive gains.

AIB’s PMI survey is a monthly temperature check of the manufacturing sector.

It asks managers whether activity improved, declined or stayed about the same compared to the previous month.

The results of the poll are then totted up to arrive at a score between 0 and 100, where above 50 means activity has increased, below it means activity has contracted and a reading of 50 means it stayed the same.

Although activity in the sector continues to improve from the unprecedented declines experienced in April as a result of public health restrictions aimed at slowing the spread of the virus, the latest index suggests that the pace of recovery in the sector is slowing down.

August’s headline index figure was 52.3, the second-highest reading in 16 months.

In July, the index hit 57.3, representing the biggest month-on-month expansion in 23 months as a result of a sharp increase in activity and the reopening of international markets that had been impacted by shutdown measures.

Commenting on the latest survey, Oliver Mangan, chief economist at AIB, said, “The loss of momentum in August is not surprising given the pick-up in new coronavirus cases over the past month, both in Ireland and elsewhere, and the continuing very uncertain economic outlook.

“The details of the August survey point to considerable caution in the sector amid much uncertainty about the economic outlook. Output continued to grow at a strong pace as more markets reopen, though not as rapidly as in July.

“However, growth in new orders while still solid, slowed appreciably from July suggesting some softening in demand.”

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On Monday, Bank of Ireland released its monthly Pulse index, which also went backwards in August after three consecutive months of gains.

The index, a composite of various business and consumer surveys conducted by the bank, was down 2.5 points from July to 59.3 in August, suggesting a stall in the rate of recovery.

It shows both consumer and business confidence slipping last month on foot of the rise in cases of Covid-19.

“The rise in virus cases at home and overseas has rattled nerves, while the rebooting of the economy has hit some speed bumps with the re-opening of ‘wet’ pubs pushed out, confusion over the travel Green List and the imposition of local lockdowns in three counties,” said Dr Loretta O’Sullivan, group chief economist at Bank of Ireland.

“There is a growing sense emerging nationally that things may be somewhat ‘stop-start’ over the coming months.

“This emphasises the importance of clear communication on the direction of public health and economic policy, which should serve to lessen the uncertainty facing households and firms.”

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