Manufacturing inflation surges to record high as pace of growth eases

Irish manufacturing output growth slowed for the fourth month in a row in November, with surging production costs, supply chain pressures, and raw material availability squeezing companies.

AIB’s monthly manufacturing survey still shows the sector to be in strong growth mode, with new orders and employee hiring levels on the up, and overall company sentiment remaining positive.

However, November’s growth level was the weakest seen since March. 

Rising energy and transportation costs kept input price inflation at record highs, which in turn drove wholesale prices to a record high.

“Capacity constraints are still very evident in the sector,” said AIB chief economist Oliver Mangan. 

Backlogs of unfinished work continued to rise sharply. The delivery times for the supply of inputs also lengthened further, reflecting the ongoing pressure on supply chains.

"The combination of strong demand for raw materials and inputs, as well as higher energy and transportation costs, saw further marked upward pressure on input prices. 

"Given these cost pressures, manufacturers raised output prices at their fastest pace in the survey’s history. Inflationary pressures, then, remain very strong in the sector." 

However, Irish manufacturing output is still stronger than the UK and the eurozone as a whole.

The manufacturing update comes as eurozone inflation hit record highs. 

Preliminary data from Eurostat, the EU’s statistics office, showed that headline inflation for the eurozone hit 4.9% in November — the highest in the single-currency region’s history, up from the 4.1% rate seen in October. 

The November reading was also ahead of market forecasts of 4.5%, and puts extra pressure on the ECB to rethink monetary policy.

Reporting: The Irish Examiner