PMI: Growth of new work at nine-month high

Graphic showing that the Ulster Bank NI PMI has seen growth in new business at a 9-month high in June

Today sees the release of June data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – indicated that output growth was maintained as new orders rose at an accelerated rate. Increased new business led to a build-up of outstanding work, but the rate of job creation eased. Meanwhile, cost inflation moderated and companies raised their output prices for the first time in ten months.

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The grass is no longer much greener on the agri side of the fence

Dairy cows

There was a time when most sectors of the Northern Ireland economy looked on with envy at the environment in which the local agri-food sector was operating. The likes of heavy manufacturers were being hit by plummeting demand and soaring input costs, whilst the agri-food sector was by comparison basking in positively glorious conditions. Demand was strong and the weakness of sterling against the Euro afforded an envious competitive advantage against food and drink firms based in the Eurozone. The result was that whilst all of the key indicators for the economy in general were pointing downwards, the key indicators for the agri-food sector were very much on the up.

That was then; this is now.

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Euro on slide with momentum suggesting more weakness to come


The ECB’s asset purchase programme (QE) is buying Eurozone government bonds which drives up their price (increased demand) but the interest rate yield (which moves inversely to the price) is heading lower. The opposite dynamic is apparent in the US due to its robust economic recovery and rising interest rate expectations.  The yield on a 10-yr German bund (government bond) is just 0.22% (the rate was 0.54% at the start of the year).  This compares with 2.14% for the equivalent US government bond. The growing interest rate differential is a key driver behind the recent currency moves but not the only one.  Political uncertainty surrounding Greece is still weighing on euro sentiment.

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Northern Ireland economic review and outlook

2013 was dubbed the ‘spreadsheet recovery’. The computer said ‘yes’, we are technically in recovery, but the consumer said ‘no’, I don’t feel it. 2014 saw the recovery begin to download, becoming increasingly evident in more tangible indicators such as employment, house prices, new car sales and business activity.

This economic recovery in Northern Ireland was facilitated by a marked pick‐up in growth in our two most important economies – the UK and the Republic of Ireland. They are estimated to have expanded by 3% and 5% respectively in 2014, following disappointing growth rates of 1.7% (UK) and just 0.2% (RoI) the previous year.

Economic Growth
As a result, the UK and RoI recoveries acted as a tow‐truck that finally pulled the Northern Ireland economy out of the ditch that was six years of contraction. The local economy is estimated to have grown by 2% in real terms in 2014. A similar rate of growth (1.5% ‐ 2.0%) is expected in 2015, only the dynamics of this growth rate will have changed. Consumer spending, stemming from real wage‐growth will account for a greater share of economic growth, whilst the corporate sector should see its contribution moderate. The UK and RoI are expected to see their growth rates slow to around 2.5% and 3.5% respectively in 2015.

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