Today sees the release of September data from the Ulster Bank Northern Ireland PMI®. The latest report – indicated that the private sector remained in a downturn as output and new orders fell again. More positively, employment continued to increase, contrasting with the UK-wide trend. Input costs and output prices continued to rise, but at rates that were much weaker than seen over the past three years.
Northern Ireland’s economic malaise during the summer months continued into the autumn with a further loss of momentum in the local private sector during September. Whilst all but one of the UK regions saw a similar trend of falling output, Northern Ireland was near the bottom of the table with only the North East and Yorkshire & Humberside experiencing sharper rates of decline. It is a similar story with new orders, which contracted for the fourth month in succession. In September, all four sectors reported a decline but the pace of contraction was most significant within construction which posted its biggest monthly decline in orders this year. Despite the recent fall in customer demand, manufacturers, retailers and firms within the services sector remain more optimistic about prospects in 12 months’ time. Conversely, construction firms are expecting demand conditions to deteriorate further over the year. On a positive note, the one silver lining with the weakening demand cloud is that supply chain delivery times eased for the sixth month running. Employment also remains a bright spot, with Northern Ireland firms continuing to increase their staffing levels at the fastest pace in the UK. However, the pace of hiring is now the slowest it has been this year. It is worth noting that the services sector also saw a reduction of its staffing levels in September, indeed at the fastest rate since February 2021. Higher fuel and wage costs were once again cited by local firms. Manufacturing was the only sector to reduce its prices in September (for the fourth month running), reflecting a continuing reduction in its cost-base. While we may be anticipating an Indian Summer in the coming weeks weather-wise, a similar improvement in business conditions during October doesn’t look likely. Similarly on the political front, there is no immediate sign of a return of the Stormont Executive.
The main findings of the September survey were as follows:
The headline seasonally adjusted Business Activity Index remained below the 50.0 no-change mark in September, ticking up to 45.9 from 45.7 in August. The solid monthly decline in output extended the current sequence of reduction to three months. Activity fell across each of the four broad sectors covered by the survey. According to respondents, waning customer demand was the main factor leading output to fall. This was also evident with regards to new orders, which decreased for the fourth month running. A shortage of new work to replace completed projects meant that firms were able to deplete backlogs of work again.
Alongside Scotland, Northern Ireland was one of only two areas of the UK to increase employment in September. Firms reported efforts to expand capacity and the filling of previously vacant positions. Companies also remained optimistic about the 12-month outlook for activity, with sentiment improving slightly from the previous survey period. Firms hope for a pick-up in demand over the year ahead.
Higher fuel costs and wages led to another marked increase in input prices during September. The rate of inflation was broadly in line with that seen in August. Meanwhile, output prices increased at a softer pace.