Manufacturing growth remains modest despite rising confidence
Growth across Ireland’s manufacturing sector remained relatively subdued last month, according to the latest Purchasing Managers Index published by AIB. While activity continued to expand, the pace of improvement softened compared with December, reflecting weaker gains in both production and new orders.
The survey highlighted subdued export demand and caution among clients, driven by ongoing economic uncertainty. These pressures weighed on order books, particularly for overseas sales, although some respondents reported signs of stabilisation in European markets.
Despite these challenges, manufacturers expressed a more positive outlook for the year ahead. Business confidence rose to its highest level since August 2023, supporting increased input purchasing and a notable rise in staff hiring during January.
The headline PMI remained unchanged at 52.2, signalling a moderate improvement in overall manufacturing conditions. This marked the thirteenth consecutive month that the index has remained above the neutral 50 threshold, indicating continued expansion. Ireland’s reading also compared favourably with flash January figures for the euro zone, the United States and the United Kingdom.
Employment growth and renewed stock building were key contributors to the January reading, helping to offset slower growth in output and new business. Production volumes did rise during the month, although the rate of increase eased to its weakest level in three months, largely due to slower growth in new orders.
Survey respondents cited elevated economic uncertainty, client risk aversion and softer export demand as the main factors limiting order growth. New business from abroad has declined in most recent months, although the overall rate of contraction remained marginal.
Commenting on the findings, David McNamara noted that the PMI has signalled manufacturing growth in every month since the beginning of 2025. He said January’s expansion reflected ongoing gains in output, orders and employment, even as global uncertainty continued to act as a headwind for sales.
Hiring activity accelerated to its fastest pace since July 2025, supported by firms’ expansion plans and longer-term optimism. Purchasing activity and inventory building also increased, pointing to a more positive outlook for the year ahead.
However, the report also flagged rising cost pressures. Input cost inflation accelerated sharply in January, reaching its highest level in three years, driven by higher raw material prices and supplier wage pressures. Factory gate prices increased as well, although at a more modest pace than input costs.
Overall, expectations for future activity improved significantly, with over half of surveyed firms anticipating higher production volumes in the coming year, while only a small minority expect a decline.
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