Source: Markit Economics

The Ulster Bank Northern Ireland PMI (Purchasing Managers' Index) for November, produced for Ulster Bank by Markit Economics - - shows that business activity in the Northern Ireland private sector remained unchanged in November - - ending a period of contraction that had lasted for twenty-three months - - although new orders and outstanding business continued to decrease. Staffing levels also fell on the month, but at a much slower rate than at the start of the year.

Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: “Back in August, we flagged that NI's private sector should return to positive growth before the end of the year. The latest PMI survey for November finally brings to an end NI's twenty-three consecutive months of falling levels of business activity. Although the latest Business Activity Index was spot on the 50 figure, which is the threshold for expansion and contraction, in our view it is consistent with a return to overall private sector growth. All sectors bar construction improved in November with the retail and services sectors recording growth. Indeed, the retail sector experienced its strongest level of activity since the credit crunch began in August 2007. Clearly, this has been driven by the influx of shoppers from the RoI. However, recent RoI budget measures, concerning VAT and lower alcohol duties, will begin to erode the current North / South price differential.

“With output prices falling for the last 14 months in a row and input costs rising for nine consecutive months, the health of NI's corporate finances remains a growing concern. The pressure on profit margins eased slightly during the month but this was not the case with the manufacturing sector. Indeed, the latter experienced a further rise in input costs in November with pricing power remaining weak. As a result, manufacturing continues to experience the greatest squeeze on profit margins of any sector. This is likely to lead to further manufacturing job losses in the New Year.”

The main findings of the November survey were as follows:

New order volumes fell further

Latest data signalled that business activity in the Northern Ireland private sector stabilised in November, thereby ending a period of contraction that had lasted for twenty-three months. Those companies that reported a rise in activity often linked growth to improved trading conditions. Where a decline in activity was signalled, panellists generally attributed this to reduced new order volumes.

Levels of incoming new work received by Northern Irish private sector companies fell again in November, extending the current period of reduction to two years. The rate of decline in new orders remained solid, but was far slower than that seen at the start of the year. Panellists reported that lower levels of new business reflected weak underlying demand.

Staffing levels continued to decline

Employment in the Northern Ireland private sector fell for the twenty-first consecutive month in November, and at a solid rate that was slightly faster than that seen a month previously. Survey participants reported that they were still cautious about staffing levels given the difficult economic environment.

November data signalled that levels of outstanding business fell for the twenty-fifth month in a row. However, the rate of backlog clearance was the slowest since March 2008. Companies widely commented that lower levels of unfinished business reflected reduced new order volumes.

Input price inflation remained robust

Average cost burdens faced by Northern Irish private sector companies increased for the ninth month running in November. Despite easing from the previous month, the rate of inflation remained robust. Copper, fuel, steel and paper were all reported to have risen in price since October. However, strong competitive pressures meant that firms were unable to pass on rising cost to clients, with prices charged falling for the fourteenth month in succession. The rate at which output prices were reduced remained considerable, despite easing to the weakest since July.