Enter your email to read this article
Read news on any topic, in one place, from publishers like The Economist, FT, Bloomberg and more.

Bounceback in manufacturing sector gathered pace during July

Stock image

THE manufacturing sector clocked up its fastest pace of growth in almost two years in July, rebounding from the worst period of the lockdown.

The pace of a recovery that was under way in June accelerated last month, according to AIB's manufacturing Purchasing Managers' Index (PMI).

The index tracks growth and decline on index either side of 50 - where a number above 50 indicates expansion. The index rose to 57.3 in July from 51.0 in June, having plunged to a low of 36 in April.

Ireland's manufacturing recovery as the lockdown eased is on trend in other countries, according to AIB chief economist Oliver Mangan.

"The strong reading for July points to a sharp pick-up in activity, but from a low base in previous months during the lockdown period," Mr Mangan said.

Output and new orders both expanded at some of the fastest rates ever recorded by the survey, although the 12-month outlook remained relatively subdued.

The manufacturing sector is largely able to operate, unlike swathes of the services sector which remain subject to restrictions including the continued closure of pubs and the quarantine rules for many foreign visitors.

Data showed manufacturing activity across the eurozone expanded for the first time since early 2019 last month as demand rebounded after more easing of the restrictions imposed to quell the spread of the coronavirus, a survey showed on Monday.

Just over 18 million people have been infected by the coronavirus. But governments around Europe have eased some restrictions that had shuttered vast swathes of the bloc's economy.

To offer support to the ravaged economy, the European Central Bank (ECB)has ramped up its stimulus measures and European Union leaders have agreed on a €750bn recovery fund.

Still, the economy contracted a record 12.1pc last quarter, official data showed on Friday, although a July Reuters poll predicted 8.1pc growth this quarter.

IHS Markit's final euro area Manufacturing Purchasing Managers' Index (PMI) bounced to 51.8 in July from June's 47.4 - its first time above the 50 mark that separates growth from contraction since January 2019. An initial "flash" release had it at 51.1.

An index measuring output which feeds into a composite PMI due today leapt to 55.3 from 48.9, its highest since April 2018.

"Eurozone factories reported a very positive start to the third quarter, with production growing at the fastest rate for over two years, fuelled by an encouraging surge in demand," said Chris Williamson, chief business economist at IHS Markit.

"Growth of new orders in fact outpaced production, hinting strongly that August should see further output gains."

Forward-looking indicators in the survey were generally more positive. However, policymakers are likely to be concerned that factories again reduced headcount, and at one of the sharpest rates in the survey's 23-year history.

The employment index only nudged up to 42.9 from 41.3.

"The job numbers remain a major concern, however, especially as the labour market is likely to be key to determining the economy's recovery path," Mr Williamson said.

Most economists predict unemployment will rise sharply as government supports fade.

Related Stories
Covid pandemic keeps services sector in India constrained in July
IHS Markit showed purchasing managers' index (PMI) for services inched up only slightly to 34.2 in July from 33.7 in…
From analysis to the latest developments in health, read the most diverse news in one place.
UK, eurozone factories bounce back; US-China tensions rise over TikTok – as it happened
UK factory output at three-year high, Eurozone output highest since April 2018 – PMI surveysGold hits new record high of…
Services PMI shrinks for fifth month
FinMin says India’s economic recovery will depend on how the pandemic behaves across the country in the coming days
Manufacturing output shrinks at a faster clip in July than in June
The IMF has estimated the Indian economy to contract by 4.5% in FY21, while Goldman Sachs expected the June quarter…
Covid-19: Services PMI shrinks for 5th month in a row
The purchasing managers’ index (PMI) for services inched up slightly to 34.2 in July from 33.7 in June, according to…
One place to find news on any topic, from hundreds of sites.
Euro zone business activity resumes growth in July
Eurozone's economy slumped by 12.1% while the growth in July was at 8.1% with the volume of retail sales in…