Manufacturing recovery running out of steam as second wave hits

Cristopher Centers

The manufacturing sector bounce back ran out of steam in September as the second wave of Covid hit, bringing to an end a three-month recovery in AIB’s Purchasing Managers Index (PMI) readings. The latest report for the manufacturing sector shows activity was flat overall in September, with production, new orders […]

The manufacturing sector bounce back ran out of steam in September as the second wave of Covid hit, bringing to an end a three-month recovery in AIB’s Purchasing Managers Index (PMI) readings.

The latest report for the manufacturing sector shows activity was flat overall in September, with production, new orders and jobs all in decline.

A rebound after the national lockdown ended in June appears to have peaked in July and has lost momentum since, according to AIB chief economist Oliver Mangan. Activity slowed in August and then fell in September, to a four month low.

“The rebound in activity seen over the summer has come to a halt. The main factor behind this, which is clear from the survey data, is weakening demand as a result of the second wave to Covid-19 and associated increased restrictions on activity,” he said.

New orders including from the UK and US have slowed and in some segments of the market shortages of supplies and transportation difficulties are also hurting activity, the data shows.

The result is less work, although the pace of job losses in September was modest. While the fallout from Covid remains the biggest influence, managers surveyed by AIB also mentioned Brexit as a source of uncertainty for foreign clients.

Data yesterday from the UK, still a key market for Irish manufacturing, shows its economy suffered a record collapse in economic output in the second quarter of 2020.

UK gross domestic product shrank by 19.8pc in the three months to June, the Office for National Statistics said, slightly less than the initial estimate of a quarterly 20.4pc crash but still greater than for any other major advanced economy and the worst UK decline since at least 1955.

The UK has rebounded in recent months, but it looks fragile.

“The renewed Covid-19 restrictions will probably mean that GDP stagnates in Q4, leaving economic activity marooned 5.5pc short of its pre-crisis level,” Ruth Gregory of consultancy Capital Economics said.

“And the risk now is that renewed containment measures send the recovery into reverse,” she added.

Meanwhile, AIB has launched a new €300m social housing fund for Approved Housing Bodies and experienced developers that can help deliver over 2,000 new sustainable A-rated social housing units, the bank said.

It follows the full allocation of a previous €100m Social Housing Fund.

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