THE manufacturing sector returned to growth last month on the back of greater certainty around Brexit, and an improvement in the industrial backdrop in Europe.

In addition, confidence among firms was at its highest since last May, according to the latest purchasing managers’ index (PMI) from AIB.

The PMI is an indicator designed to provide a single-figure measure of the health of the industry.

Any reading over 50 is deemed growth.

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Last month, the headline PMI moved back into expansion territory, rising to a nine-month high of 51.4 from 49.5 in December, signalling an overall improvement in Irish manufacturing operating conditions.

In December, the Conservative Party secured an overall majority in the UK general election, providing increased stability in the British parliament.

On Friday the UK formally left the EU, and the two will now concentrate on negotiating a trade agreement.

“The AIB manufacturing PMI survey for January shows that activity in the sector picked up momentum at the start of 2020,” said Oliver Mangan, AIB chief economist.

“The survey shows marked improvements in key sub-components such as output, orders and employment.”

New orders rose for the third time in four months, and at the fastest rate since April last year.

A number of firms that took part in the survey reported an improving UK market and stable US economy, which was reflected in a halt to the recent slide in new export orders at the start of the year.

That said, the new orders index remained slightly below its long-run trend level, according to the survey.

The stronger inflows of new work drove a rise in manufacturing output in January. Production rose for only the third time in the past nine months, and at the fastest rate since March 2019.

Manufacturers supported workloads by expanding their purchasing operations, with the volume of inputs ordered posting the first meaningful rise since last April.

On the back of improving conditions in the industry, employment increased at the start of this year, following a two-month spell of job shedding. In addition, improving business conditions were accompanied by a brighter 12-month outlook.

The Future Output Index posted its largest one-month gain in more than three years, and signalled the strongest overall sentiment among manufacturers since last May.

The improving confidence was linked to new products, the installation of new plant machinery and greater certainty regarding Brexit.

However, Mr Mangan warned “difficult” trade talks between the EU and the UK “could test this greater optimism, as may the continuing subdued growth prospects for the global economy”.

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