Irish manufacturing has been hit by the sharpest rise in input prices since they were first asked the question 24 years ago and are passing on the hikes, according to the latest survey of purchasing managers here.
The survey suggests that the further huge spike in wholesale gas and oil, as well as metal prices, since Russia’s invasion of Ukraine on February 24 will be passed on to consumers in the coming weeks.
However, despite the fallout from the Ukraine war, the purchasing managers also reported a sharp rise in orders.
Part of that new demand can be put down down to businesses and consumers trying to beat what they expect to be a new round of price hikes and supply disruptions sparked by the war, according to the AIB Irish Purchasing Managers’ Index for March.
“Inflation picked up to its highest levels in the 24-year history of the survey.
Faced with surging input prices, manufacturers raised their own prices by a survey-record degree in March,” said AIB chief economist Oliver Mangan in a commentary on the findings.
However, the war hasn’t yet dented output, with growth quickening in March and remaining “at a very high level on a historic basis”, the survey found.
New export growth from overseas customers fell back somewhat from February amid caution over the war.
Similar surveys are carried out in most countries on a monthly basis across.
The Irish survey is particularly watched because of the large number of foreign-owned multinationals based in Ireland that make pharmaceutical, computer, and medical equipment for global markets.
Manufacturing will be concerned should the economic war against Russia lead to a new round of hikes in energy costs.
Part of the economic conflict involves the Kremlin insisting that western Europe pay for Russian gas and oil supplies in roubles, although the effects of this clash remain unclear.
There was more evidence of rampant consumer price inflation across the eurozone.
Data published on Thursday March 31 shows some new highs of inflation reached in March, with 5.1% in France and 7% in Italy.
Reports the previous day were even worse, with 7.6% in Germany and almost 10% in Spain.
In Ireland in February, inflation was running at 5.6%. Economists predict Irish inflation will peak at 8.5%, and possibly as much as 10%, by the early summer and remain at elevated levels through next year.
The figures showcase the squeeze felt across the continent. Surging inflation is already a huge concern for consumers, with confidence levels rapidly falling back towards pandemic lows. As money worries mount, that could dent demand and output.
“Savings amassed during the pandemic may help cushion the blow,” according to Bloomberg economists. “But the shock will still hit growth hard as spending on other things gets squeezed.”
- Additional reporting Bloomberg