Today sees the release of February data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – signalled that the Northern Ireland private sector remained comfortably inside growth territory. That said, rates of expansion in output, new orders and employment all eased over the month. On the other hand, inflationary pressures intensified, with sharper rises in both input costs and prices charged.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“Northern Ireland’s private sector continued to report broadly favourable business conditions in February. However, there was a moderation in the rates of growth in a number of key indicators. Local firms reported an easing in output growth but the rate of expansion remained robust and above the pre-recession historical average. Confidence about the year ahead, new orders and employment all fell to seven-month lows in February. Meanwhile inflationary pressures intensified again with input costs rising at their fastest rate in nine months. Retailers continue to bear the brunt of these cost and price increases.
“All sectors saw an easing in the rates of expansion in orders with the slowdown most marked amongst services and construction firms, though this follows multi-year highs. Meanwhile manufacturing was the only sector to report faster rates of output growth last month with activity growing at its fastest rate in almost three-and-a-half years.
“In terms of employment, although it was the 37th successive month that firms increased their workforce numbers, the pace of job creation eased in February, with manufacturing and services firms seeing the biggest slowdown in their rates of hiring. Indeed the rate at which service sector businesses are increasing their headcount slowed to an 18-month low.
“Overall, whilst the numbers suggest that the local private sector continued to grow in February, there were clear indications of a slowdown, with a dip in optimism about the year-ahead also evident. With the prospect of trade wars between Europe and the US, alongside the uncertainty about a range of political issues, this is perhaps to be expected. Indeed it would be unsurprising if this trend of easing back further from the multi-year highs at the start of the year continued in the months ahead.”
The main findings of the February survey were as follows:
The headline seasonally adjusted Business Activity Index posted 56.3 in February from 58.7 in January. The reading signalled a sharp monthly rise in output, albeit one that was the weakest in three months. Northern Ireland companies again recorded a faster increase than the UK as a whole. Where activity rose, panellists linked this to higher new business and improving client demand. All four sectors saw activity expand, led by retail. New product launches and marketing activities helped firms to secure new business in February, extending the current sequence of growth to 16 months. That said, the rate of expansion was the slowest since July last year.
Rising new business fed through to a further accumulation of backlogs of work. That said, the latest increase was the weakest in seven months. The rate of jobs growth also slowed in February and was modest. Input prices rose at the fastest pace in nine months amid reports of higher costs for fuel, raw materials and staff. Retailers posted the sharpest increase in cost burdens, followed by manufacturing firms. Retail also saw the sharpest rise in output prices of the four monitored sectors. Overall, charges increased at a sharp pace that was the steepest since March 2017. Business confidence remained strongly positive in February as close to 31% of panellists predicted a rise in output over the coming year. That said, sentiment eased to a seven-month low.