Source: Markit Economics

The Ulster Bank Northern Ireland PMI (Purchasing Managers' Index) report for December 2009 - - produced for Ulster Bank by Markit - - signalled that business activity in Northern Ireland’s private sector fell in December following no change in the previous month. Although levels of new and outstanding business both fell at faster rates on the month, jobs were cut at the slowest pace since April 2008.

Commenting on the latest survey findings, Richard Ramsey, chief economist Northern Ireland, Ulster Bank, said: "While the PMI narrowly failed to return to growth in December, the latest survey compares favourably with the record lows recorded at the start of 2009.

“Despite the well publicised influx of shoppers from the Republic of Ireland, local retailers experienced the sharpest fall in activity of all the sectors in December. This suggests that the clear outperformance amongst some firms, in certain locations, is masking the general malaise in the sector as a whole.

“The latest survey reveals an easing in the rate of job losses with the decline in employment less marked than in the UK. This continues the trend that has emerged since June 2009. However, with the rate of decline in new orders accelerating for the second consecutive month in December, it will be some time before we see an overall rise in private sector employment. Indeed, NI's underperformance, relative to the UK, is most marked in the level of new orders. The latest survey records the widest differential since the series began.

“Meanwhile, the corporate profits squeeze continues with pricing power being eroded within the context of a rising cost base. Unlike their UK counterparts, NI firms once again reduced the average prices of their goods and services for the fifteenth consecutive month. Overall, NI firms continue to experience a more intense profit squeeze than UK businesses. This is most apparent within the manufacturing sector with NI's higher electricity costs the main factor behind this.”

The main findings of the December survey were as follows:

Intakes of new work fell at sharper rate

Private sector output in Northern Ireland fell during December, albeit at a marginal rate that was much slower than that seen at the start of the year. Where a reduction in business activity was signalled, companies widely attributed this to lower volumes of new business and unfavourable trading conditions.

December data pointed to a further reduction in new business received by firms operating in the Northern Ireland private sector. The rate of decline in new work was solid, accelerating to the fastest in five months. Those respondents that reported a drop in new order levels often linked this to lacklustre underlying demand. Some panellists also mentioned that customers had curbed non-essential expenditure in response to uncertain economic prospects.

Job shedding eased

Outstanding business continued to fall in December, mainly reflecting further reductions in new work. The rate at which backlogs were depleted remained marked, and much faster than that seen across the UK as a whole.
Staffing levels in the Northern Ireland private sector fell again in December, extending the current period of decline to twenty-two months. However, the rate of job shedding eased to the slowest since April 2008. Firms linked job shedding to restructuring efforts and the non-replacement of departing staff.

Price discounting remained sharp

Average input costs faced by Northern Ireland private sector companies rose for the tenth month running in December. Input price inflation remained solid, but was much slower than the historical average for the series. Panellists cited rising fuel costs as having generated inflationary pressures during the latest survey period.

December data indicated that prices charged by Northern Ireland private sector companies were reduced at a sharp rate, albeit the weakest since November 2008. Firms reported that charges were reduced in response to strong competitive pressures and pressure from clients for discounts.