Today sees the release of September data from the Ulster Bank Northern Ireland PMI. The latest report – produced for Ulster Bank by Markit – pointed to output growth amid a further increase in new orders. With workloads rising, companies continued to take on extra staff. Meanwhile, lower commodity prices led to a further easing in the rate of cost inflation and output prices were reduced at a solid pace.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“According to the Ulster Bank Northern Ireland PMI, the private sector got off to a slow start at the beginning of 2015. However, the general trajectory since then has been one of improvement. Indeed, the rate of growth in business activity and new orders accelerated in the third quarter, relative to the previous three months. Meanwhile, local firms reported their first quarterly rise in export orders in Q3 since the same period last year. Private sector firms have now increased their staffing levels for the ninth consecutive quarter, albeit the pace of job creation eased. Interestingly, the third quarter represented the first time in four quarters that firms have posted growth in output, orders, exports and employment.
“Overall, the latest survey is littered with positive headlines. But equally there are also reasons for concern - not least the global economic slowdown which appears to be gathering momentum. It is noted that global manufacturing output growth slowed to a 29-month low in September. Meanwhile the UK PMI fell to its weakest rate in 29 months.
“The most encouraging aspects of the latest Northern Ireland survey in September were the pick-up in the rate of growth in business activity and new export orders. The former increased at its fastest rate in 11 months (although the rate of growth remains well below the long-term average that pre-dated the downturn). Meanwhile export orders, which have been contracting for most of the last year, increased in September at their fastest rate in 14-months. However, the pace of growth of new orders (domestic and exports) slipped for the third month in a row, and remains below the pre-downturn, long-term average. The pace of employment growth also slipped in September with Northern Ireland firms experiencing one of the weakest rates of employment growth of any UK region.
“Looking at the individual sectors, retail posted the fastest rates of growth in employment, orders and activity. The ‘noflation’ environment coupled with pay increases has boosted disposable incomes, and retailers are the primary beneficiaries from this improvement in consumer sentiment. Outside of retail, the construction sector has seen a return to growth in output and orders in September. However, the construction industry continues to lag, and was the only sector to report a contraction in activity, orders and employment over the course of Q3.
"The service sector is faring rather better, and remains in expansion mode. Despite an easing in the rate of growth in business activity in the third quarter, new orders growth and employment accelerated, albeit from low levels. The manufacturing sector is experiencing a notable slowdown, with activity, orders and employment all weaker in Q3 relative to the previous quarter. Manufacturing orders have fallen more sharply amongst Northern Ireland firms than in their counterparts within the UK and the Republic of Ireland in recent months. Manufacturing orders fell in September for the first time in nine months, while the seven month run of employment growth came to an end.
“On a positive note, the September survey highlighted growth across all sectors for the first month in over a year. However, as far as the global economy is concerned, some storm clouds appear to be gathering. Furthermore, Northern Ireland’s public expenditure challenges are set to intensify.”
The main findings of the September survey were as follows:
The headline seasonally adjusted Business Activity Index rose to 52.9 in September from 51.1 in August, signalling a fifth consecutive monthly increase in output across the Northern Ireland private sector.
Moreover, the rate of expansion was solid, and the fastest since October 2014. All four monitored sectors recorded growth of output, led by retail. Construction firms posted a first increase in activity since February. Panellists mainly attributed higher activity to growth of new business, which also rose for the fifth month running in September. Manufacturing new orders decreased for the first time in nine months.
Increased workloads encouraged firms to take on extra staff, extending the current sequence of job creation to eight months. However, the latest rise was only slight and weaker than that seen across the UK economy as a whole. Meanwhile, backlogs of work decreased for the first time in four months, albeit marginally.
As had been the case in the previous month, the rate of cost inflation among Northern Ireland companies slowed in September. While higher staff costs had contributed to increased input prices, a number of respondents mentioned reductions in the prices of commodities such as fuel and steel. Reflecting this, the manufacturing sector posted a decline in input costs, the first in seven months. Deflationary pressures in manufacturing were also highlighted with regards to output prices as charges in the sector decreased at the fastest pace since February 2010. Across the private sector as a whole, output prices fell solidly, with the rate of decline the sharpest in seven months.
