Irish manufacturing growth continues despite export challenges, PMI shows

DUBLIN (Reuters) - Ireland's manufacturing sector grew at a solid pace in May as strong domestic demand offset a second successive monthly decline in export orders due to subdued sales into the United States and Britain, a survey showed on Tuesday.

The AIB Ireland Manufacturing PMI fell a touch to 52.6 from April's 53.0, but was above the 50.0 threshold indicating growth for the fifth consecutive month. That marked the longest period of expansion in a bumpy two-and-a-half years for the sector.

While domestic demand bolstered new orders, export sales contracted at the fastest pace in five months with manufacturers citing caution among U.S. clients and weaker sales to Britain, two of Ireland's main trading partners.

New export sales have generally been weak since the middle of 2022 and only recorded growth on five occasions over that period, including most recently in February and March this year.

Ireland's finance ministry last month downgraded its growth forecasts slightly for the domestic economy this year to 2% if a 10% tariff on European Union exports to the U.S. remains in place, or 2.5% if tariffs are removed.

Tuesday's survey showed that input price inflation for the sector eased from April's 26-month high, though cost pressures remained high, linked to rising agricultural, commodity and raw material prices. Exchange rate appreciation against the U.S. dollar helped mitigate some import price pressures.

Employment increased, with hiring reaching its fastest pace since January, reflecting rising workloads and improved business activity expectations. Around 39% of surveyed firms anticipate increased output in the year ahead, while 9% foresee a decline.

(Reporting by Padraic Halpin; Editing by Toby Chopra)

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