Source: Markit Economics

June data from the latest Ulster Bank Northern Ireland PMI (Purchasing Managers' Index), signalled another weakening of the Northern Ireland private sector economy. However, slower reductions in output, outstanding business and employment suggest that the most intense phase of recession may have passed.

Commenting on the latest survey findings, Richard Ramsey, NI Economist, Ulster Bank, said: "The pace of decline in business activity amongst NI's private sector firms eased for the second successive quarter in Q2 2009. This provides further confirmation that the worst of the output declines appear to have passed. However, NI firms failed to match the improved performance experienced by the UK as a whole. Seven regions within the UK reported an increase in business activity in June which propelled the UK to its second successive month of private sector output growth. The latest survey confirms that the level of private sector activity in NI remained the weakest of all the UK regions. Indeed, this trend has been a feature of the PMI survey over much of the last 12 months, with NI business activity trailing the UK average since November 2007.

“The most encouraging aspect of the latest survey was the significant easing in the rate of job losses. All the UK regions reported job losses in June, however, after Scotland, NI firms reduced their staff headcount by a lower rate than any other UK region. Indeed, this was the first time since November 2007 that NI's employment index outperformed the UK as a whole.

“At a sectoral level, the most notable improvement in recent months has been within the manufacturing sector, which posted its first increase in output since August 2007. This suggests that manufacturing output is at least plateauing, albeit at very low levels, as we enter the third quarter. Meanwhile, the construction sector continues to bear the brunt of the output and employment declines in NI."

Slowest fall in output since May 2008

Activity levels fell for the nineteenth consecutive month in June, largely as a result of continued falls in new business. Despite easing to its weakest for thirteen months, the reduction was in contrast to marginal activity growth recorded across the wider UK economy. Incoming new business received by private sector companies decreased for the nineteenth month running in June.

Even so, the average rate of decline for Q2 was much weaker than those registered in Q1 2009 and Q4 2008. Panellists reported that weak economic conditions continued to have a negative influence on demand (particularly in the construction and retail sectors).

Job shedding eased further

Spare capacity remained evident, with outstanding business levels falling for the twentieth month running in June. However, the pace of reduction eased for the third straight month to its weakest since July last year. June data indicated that employment levels in the Northern Ireland private sector fell for the sixteenth month in a row. The rate at which jobs were shed was the slowest for twelve months and – for the first time in the current sequence of decline – weaker than that registered across the UK economy as a whole.

Sharp fall in output prices

Prices charged fell for the ninth successive month in June. The pace of decline was the fastest for four months, and far sharper than the UK average. Respondents linked the latest reduction to strong competitive pressures. Inflation of input prices meant that firms’ margins were placed under added pressure in June. Higher prices for a variety of raw materials were cited by panellists as the principal factor contributing to the latest rise, which was the fourth in successive months. That said, the increase was much less marked than the long-run series average.