Today sees the release of July data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – pointed to a pick-up in growth of both activity and new business as the economic recovery continued. Companies took on extra staff at a solid pace, albeit one that was slightly reduced from June. Meanwhile, the rate of cost inflation quickened for the second month in a row, but output prices again rose only slightly.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“The Northern Ireland private sector started the second half of 2014 in the same vein as it ended the first, seeing strong growth in activity and new business. Moreover, the recent elevated rates of expansion were maintained in July as respondents highlighted the beneficial impacts of strong growth across the UK as a whole. Panellists also reported that Northern Ireland continues to benefit from improving economic conditions in the Republic of Ireland, its largest export market. Highlighting this, new export orders rose solidly during July.
“The construction sector was again the star performer in terms of growth momentum, although the current period of expansion has been broad-based across the economy with manufacturers and service providers each posting faster increases in output in the latest survey period. In relation to the construction sector, the strong growth in output does not necessarily relate to work being done in Northern Ireland, as many local construction companies have been expanding their workloads elsewhere, particularly GB.
“Positive news emanated from the labour market again in July, with employment now having risen in 13 successive months. The rate of job creation has eased off somewhat through the summer, but the continuing strong rates of growth in new work and further rises in backlogs should mean that firms will keep on adding to their staffing levels in the near-term at least.
“The rate of cost inflation picked up in July, with each of the four monitored sectors seeing faster rises in input prices than in June. However, output prices have failed to follow suit, suggesting profit margins are being squeezed. Some survey respondents reported the need to use discounts in order to remain competitive, highlighting that while strong monthly growth continues, the economic recovery still has a long way to run.”
The main findings of the July survey were as follows:
Faster rise in business activity
A further sharp expansion of private sector output in Northern Ireland was recorded in July as the headline seasonally adjusted Business Activity Index rose to 59.8 from 59.0 in the previous month.
The thirteenth successive monthly increase in activity was faster than registered across the UK economy as a whole. Panellists attributed the rise in activity to an upturn in the domestic economy which had enabled them to secure higher levels of new business.
New order growth quickened slightly in July, with respondents reporting improving economic conditions across the UK. The construction sector posted the fastest increase in new business during the month, with the pace of expansion hitting a post-crisis high. Meanwhile, new export orders rose at a solid pace, with panellists highlighting the strength of demand from the Republic of Ireland.
Further solid rise in employment
Rising new business led companies to increase their staffing levels during July. The rate of job creation remained solid but slowed to the weakest since February. The rise in employment was also slower than that recorded across the UK economy as a whole. Backlogs of work continued to increase, with the rate of accumulation unchanged since June. Outstanding business has now risen in each of the past ten months.
Input price inflation picks up
Northern Ireland companies posted another strong rise in input costs during July, with the rate of inflation much quicker than the UK economy average. Moreover, the pace at which input prices increased quickened for the second month running. Some panellists reported higher salary payments, while others mentioned increased raw material costs. Construction firms recorded the fastest increase in input prices.
A slight rise in output prices was recorded in July, with the fifth consecutive monthly increase in charges little-changed from that seen in the previous month. Those respondents that recorded a rise in output prices linked this to the passing on of higher input costs to clients, but some panellists lowered charges in the face of competitive pressures.
