Today sees the release of August data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – signalled that August saw sharp rises in activity and new business levels, while firms continued to increase their staffing numbers. A further marked rise in input costs was recorded, but the rate of output price inflation was only marginal.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“Northern Ireland’s private sector recovery continued last month with local firms notching up their fourteenth successive month of growth in output, employment and export orders. As expected, the pace of growth in these indicators has moderated relative to the record rates of growth posted in the second quarter. However, this moderation should be put in context. Private sector firms were still experiencing faster rates of growth in business activity, new orders and employment in August than the pre-credit crunch long-term average. As the recovery continues, growth rates are anticipated to moderate to more normal levels.
“Whilst local businesses continued to report strong demand last month, inflationary pressures remain. According to survey respondents, higher wage costs are the main factor leading to input cost inflation. Meanwhile, output price inflation, or pricing power, eased to a three-month low although this was largely due to falling prices for the manufacturing sector. Indeed, local manufacturing firms signalled that the price of their goods fell at the fastest pace last month since April 2013. The strength of sterling is likely to be a major factor here as some price competitiveness has been eroded over the last year or so.
“Despite this, however, the local manufacturing sector reported a pick-up in the rate of business activity, new orders and employment in August. Indeed manufacturing was the only sector to report an improvement in all three of these measures relative to July. The local construction sector also reported a pick-up in activity last month. However, as we have previously flagged, the very strong PMI performance for the construction sector is concealing a two-speed construction recovery. The strong rates of growth in new orders and activity are largely linked to work outside Northern Ireland, particularly in England. Meanwhile the domestic market remains rather subdued.
“Local services firms reported a slowdown in their respective output, orders and employment growth rates in August. It is noted that the rate of growth in output, employment and new orders amongst service sector firms fell below their pre-downturn long-term averages. The local retail sector reported the steepest slowdown in activity last month although there was a slight pick-up in employment growth in the sector.
“Overall, the latest Ulster Bank PMI report highlights that a sustained broad-based recovery remains on track. It is encouraging to note that Northern Ireland’s two largest trading partners – Great Britain and the Republic of Ireland – saw an acceleration in the rate of expansion in their respective economies last month. This bodes well for local businesses in the months ahead.”
The main findings of the August survey were as follows:
Slower rise in activity
The headline seasonally adjusted Business Activity Index posted 56.7 in August, down from 59.8 in July and signalling the weakest expansion of activity since March. However, the rate of growth remained sharp and output in theNorthern Irelandprivate sector has now increased in 14 successive months. Panellists indicated that improving economic conditions and stronger confidence among clients had helped to support growth of output. This was also in evidence with regards to new business which increased for a fifteenth straight month. That said, the rate of expansion in new orders also eased and was the slowest since last October.
Solid increase in employment
A further solid rise in staffing levels was recorded in August, with the rate of job creation only slightly slower than seen in July. All four sectors posted increases in employment, led by manufacturing. Backlogs of work also continued to increase during the month, extending the current sequence of accumulation to 11 months.
Charges raised only slightly
Input prices increased sharply, with anecdotal evidence linking part of the latest rise to higher staff costs. The rate of cost inflation inNorthern Irelandremained much stronger than seen across theUKas a whole. Although companies in Northern Ireland continued to raise their output prices in August, the rate of inflation was only marginal and the weakest in three months.
