The latest Ulster Bank Northern Ireland PMI is out today. It indicates that solid growth of new orders fed through to a further increase in business activity in July. There were reports of success in securing new work from the Republic of Ireland amid sterling weakness, helping to boost total new business. Job creation was sustained, albeit at a more moderate pace, while inflationary pressures continued to ease.
The Ulster Bank Northern Ireland PMI for July reveals that the private sector notched up another month of growth in output, orders and employment. However, whilst growth is to be welcomed, we can’t escape the fact that rates of expansion lag behind the UK averages for all of these indicators. Indeed, Northern Ireland’s private sector firms recorded the weakest performance in business activity, after the North East of England where output fell.
The reality is that the overall tone of the latest survey is characterised by slower rates of growth. Firms reported a slight slowdown in the rate of growth in business activity, with July’s figure at a nine-month low. Meanwhile, new orders and exports saw their growth rates quicken. The private sector has been increasing its staffing levels for the last two-and-a-half years. Last month, however, the pace of job creation slipped to a six-month low.
Softer inflationary pressures are to be welcomed. Following the recent record highs, firms reported the weakest rate of input cost inflation in July in 13 months.
The theme of easing is becoming evident in some sectors more than others. Manufacturing output growth eased to a 14-month low, while employment fell for the first time in six months. But context is important here, with manufacturing firms experiencing a period of rapid expansion over the last 6-9 months. A slowdown is relative to these strong rates of growth. Furthermore, order books are growing at a rapid rate by historical standards.
Meanwhile, firms within the construction industry are reporting a more marked easing. Output, new orders and employment all fell in July. Retailers have been reporting a weakening in demand in recent months. Retail sales stabilised last month following June’s decline. There was also a slight pick-up in orders with employment growth continuing albeit at its weakest rate in two years. The wider services industry (excluding retail) was the sector to buck the easing trend. Business activity growth accelerated to a 16-month high, with job creation picking up too.
Despite the ongoing political and Brexit related uncertainty, Northern Ireland’s private sector remains relatively upbeat. Almost one-third of firms expect to have more work in 12 months’ time than they do currently. Indeed, optimists currently outnumber pessimists by more than two to one on this front.
Solid growth of new orders during July fed through to a further increase in business activity at Northern Ireland companies. There were reports of success in securing new work from the Republic of Ireland amid sterling weakness, helping to boost total new business. Job creation was sustained, albeit at a more moderate pace, while inflationary pressures continued to ease.
Activity continues to rise solidly
The headline seasonally adjusted Business Activity Index posted 53.1 in July, down fractionally from 53.2 in June but still signalling a solid monthly expansion of output across the Northern Ireland private sector. Activity has now increased in each of the past ten months. Overall growth was driven by the service sector, which posted the strongest rise in activity since March 2016.
Central to the latest increase in output was a further rise in new orders. Moreover, the rate of expansion quickened from that seen in June.
A number of respondents mentioned that overall new order levels were boosted by new business from clients in the Republic of Ireland as sterling weakness helped them to secure new work. The rate of growth in new export orders also picked up during the month.
Slower rise in employment
Increased workloads led Northern Ireland companies to take on extra staff in July, as has been the case throughout the past two-and-a-half years. That said, the rate of job creation moderated and was the slowest since January.
The slowdown in job creation was registered in spite of evidence of increased capacity pressures as backlogs of work rose for the second time in the past three months.
Inflationary pressures ease
The rate of input cost inflation eased for the third month running and was slower than the UK average for the first time in more than two years. That said, input prices still rose sharply, due to currency weakness and higher staff costs.
In line with the trend in input prices, the pace at which firms increased their charges eased to a nine-month low.
Companies in Northern Ireland remained confident that output would increase over the next 12 months, largely due to positive expectations regarding new orders. Close to 32% of panellists predict activity to rise, against 13% forecasting a fall.