|Source: Markit Economics |
The Ulster Bank Northern Ireland PMI (Purchasing Managers' Index) produced Markit Economics and published today, signalls that the Northern Ireland private sector continued to contract in October, albeit at the slowest rate since the start of 2008. Margins remained under pressure, with input price inflation the strongest for a year and output charges reduced sharply.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: “While NI's private sector continues to witness falling levels of output and employment, five of the six indicators improved during October. That said, NI's levels of business activity have now lagged the UK average for the last two years.
“The most encouraging aspect of the latest survey was the significant easing in the rate of job losses. Indeed, the pace of employment decline has not been as sharp as the UK for the last five months. It is noted that back in February, almost 30% of NI firms reported falling levels of employment. Meanwhile, in October, less than half this number were still signalling job losses. This supports our view that the rate of increase in NI's official unemployment figures will continue to ease in Q4.
“At a sector level, the UK and NI services firms continue to report falling employment levels at a broadly similar rate. However, one notable difference is within the manufacturing industry. While UK firms in this sector continue to report significant job losses, their Northern Ireland counterparts recorded modest employment gains. However, this recent pause in manufacturing job losses is expected to be temporary. After all, the squeeze on profit margins, which intensified once again in October, is most acute within the manufacturing sector."
The main findings of the October survey were as follows:
Slower reduction in business activity
Business activity in the Northern Ireland private sector fell for the twenty-third consecutive month in October. However, the pace of reduction eased to the slowest since January 2008. Where a decline in private sector output was signalled, companies linked this to reduced inflows of new business and difficult trading conditions. New business placed at firms operating in the Northern Ireland private sector fell again in October, extending the current period of decline to twenty-three months. Although the pace of reduction was the second-weakest since February 2008, it contrasted with solid growth registered across the UK economy as a whole. Companies linked reduced sales to fragile demand, mainly reflecting weak economic conditions.
Job shedding continued, albeit at slower rate
Staffing levels in the Northern Ireland private sector continued to fall in October, although the overall reduction was the least marked since April 2008. Those respondents that signalled a decline in employment widely attributed this to the non-replacement of departing staff, largely as a result of falling client demand and ongoing cost cutting measures.
Input price inflation accelerated again
October data signalled that prices charged by Northern Ireland private sector companies were reduced at a steep rate that was much faster than that seen in the wider UK economy. Those respondents that reported price discounting generally attributed this to strong competitive pressures, which restricted their ability to protect their operating margins.
Input price inflation accelerated to the strongest for twelve months in October. The overall increase was marked, and faster than the UK average. Fuel, salary, steel and utility costs were all reported to have risen. Meanwhile, adverse exchange rate factors were also mentioned as having generated inflationary pressure. Average input prices have now risen for eight successive months.