Brexit reading flashes red for Irish factories
Crash-out Brexit fears caught up with Irish manufacturers in August as output contracted at a pace not seen since spring 2013.
That is according to the closely watched AIB Purchasing Managers’ Index, which showed that new business levels, new orders, and inflows of work from abroad fell back last month when Boris Johnson asserted his new administration was prepared to take Britain out of the EU without a deal and when global stock investors got increasingly jittery over the trade wars waged by US President Donald Trump.
The survey also reported some purchasing managers as saying they only hired Irish staff in August to bolster their defences against Brexit, and not to handle any upturn in business.
A reading that measures hopes for the next 12 months also fell, although purchasing managers still expect output to rise from current levels.
The survey’s main reading, at 48.6, was down only slightly from July, but any reading below 50 means that activity has contracted.
The Irish purchasing manufacturing survey is closely watched across Europe because it reflects not only the prospects for factories supplying the small domestic market, but, significantly, also covers the output of the huge number of multinationals that make pharmaceuticals, medical devices, and computer parts for customers across Europe and the US.
Irish businesses and financial markets are braced for what could be a decisive week in the Brexit saga at Westminster, which may determine whether MPs will decommission Mr Johnson’s “do or die” negotiating threat to crash Britain out of the EU at Halloween, even at the risk of a no-deal outcome.
Irish stock markets, as well as currency markets, will be closely watching whether sterling — the key indicator of a hard Brexit —heads for a further slump if British opposition politicians and dissident Tory MPs fail to outmanoeuvre Mr Johnson in the coming days.
Sterling traded at 90.37p, indicating a high chance of a no-deal exit.
Chief economist Oliver Mangan at AIB said Brexit, as well as the US-China trade wars, were weighing on Irish factories.
“Irish manufacturing activity, then, has been hit by a double whammy of global weakness in the sector and Brexit uncertainty,” he said.
“It is unlikely to pick up until these headwinds subside. However, output could be boosted in the next couple of months if firms start to stockpile ahead of the latest Brexit cliff-edge date of end October.”
China and the US began imposing additional tariffs on each other’s goods from the weekend, the latest escalation in a bruising trade war, but Mr Trump said the sides would still meet for talks later this month.
The Trump administration began collecting 15% tariffs on more than $125bn (€113.5bn) in Chinese imports, including smart speakers, Bluetooth headphones, and many types of footwear.
In retaliation, China started to impose additional tariffs on some of the US goods on a $75bn target list.
The extra tariffs of 5% and 10% were levied on 1,717 items of a total of 5,078 products originating from the US. Beijing will start collecting additional tariffs on the rest from December 15.
Meanwhile, accounting firm BDO also said optimism among Irish firms had slumped to levels last seen at the end of the recession five years ago.
Separately, the lack of planning for a no-deal Brexit could even see many firms go out of business, said Mike McGrath at Cork-based supply-chain consultancy firm Arvo Procurement.
