Dickie Best and Barbara McNarry of the Best Foundation with Cormac McCarthy CEO, Ulster Bank in Oct 2006 at the launch of the commemorative bank note, celebrating one of Northern Ireland’s best known sporting personalities - the late George Best

The Ulster Bank Northern Ireland PMI (Purchasing Managers' Index) for August– produced for Ulster Bank by Markit Economics – signalled that the economy continued to deteriorate sharply in August. Activity, new business, backlogs and employment all declined at survey-record rates, while inflation of both input and output prices remained at strong levels.

The Northern Ireland survey forms part of a series of regional surveys published by The Royal Bank of Scotland Group and Markit Economics, and is derived from the highly regarded national PMI surveys produced by Markit for the Chartered Institute of Purchasing and Supply.

Commenting on the latest survey findings, Richard Ramsey, NI Economist, Ulster Bank, said: “The most noticeable feature of the latest PMI is the fact that the rate of decline in private sector output eased significantly in the UK whereas NI's business activity index hit a new low. At a regional level, the pace of NI's private sector contraction was faster than any other UK region and the RoI.

“Weakness in the NI private sector was also apparent in the respective new business, employment and backlogs indices - all of which reached fresh lows and continue to compare unfavourably with the UK. At a sectoral level, NI's manufacturing industry has experienced a notable deterioration during August and signalled a greater reduction in staffing levels than any other sector.

“On a positive note, input cost inflation, although remaining high, fell back to its lowest level since March this year. Falling oil prices, if they can be sustained in the months ahead, will be vital in easing some of these cost pressures, particularly for manufacturers.”

The main findings of the August survey were as follows:

Marked contraction of new orders…

Latest data pointed to a continuation of the recent downward trend in incoming new business. Volumes of new work fell for a ninth consecutive month during August, with the rate of contraction quickening to the sharpest in over six years of data collection. Particularly sharp declines in new orders were recorded in the manufacturing, construction and retail sectors. Anecdotal evidence primarily linked depressed demand conditions to weakening economic sentiment, a falling housing market and the reduced availability of credit.

...led to record fall in activity

Lower new business resulted in a marked reduction in activity at Northern Ireland private sector firms in August. The latest drop in output was a new series-record and far sharper than the average for the UK as a whole.
Additional spare capacity was another consequence of the lack of incoming new work, as firms cleared backlogs at the fastest rate in the history of the survey.

Job cutting gathered pace

Panellists reported a sixth consecutive month of falling employment in August, with the latest drop a fresh series-record. Job losses were attributed by survey respondents to sharply reduced workloads and cost-cutting measures.

Further steep increase in input prices...

Input cost inflation in the Northern Ireland private sector economy remained substantial in August, despite moderating to a five-month low. Energy, fuel, transport and raw materials were frequently reported as up in price.

...underpinned robust rise in charges

Inflationary pressure on input costs underpinned a further strong increase in output prices during August, albeit the slowest in four months. Retailers in particular continued to raise their charges at a marked pace. However, panellists frequently reported that their pricing power remained constrained by weak demand, and the differential between input and output price inflation was again substantial.