Today saw the release of October data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – pointed to an acceleration of the economic downturn in Northern Ireland as the seasonally adjusted Business Activity Index fell to 40.5, from 44.6 in the previous month. Meanwhile, new business and employment continued to decline at substantial rates.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: “Globally, manufacturing output contracted for the fifth successive month, and the pace of contraction in the Eurozone picked up. Even Germany saw its manufacturing sector decline at an increased rate in October. In the UK, the private sector as a whole fell below the 50 threshold as the services sector, as well as manufacturing saw a slowdown.
“In Northern Ireland, positives included local manufacturing firms reporting an increase in new orders, compared with a decline for the UK overall, and local manufacturing firms increasing prices charged on their goods for the first time in three months. They also experienced an easing in input cost inflation.
“But overall, Northern Ireland private sector firms reported a difficult month in October. Whilst there are still a significant number of firms experiencing growth, there are currently twice as many reporting falling output. As a result, Northern Ireland had the steepest decline in private sector output of the UK regions.
“The pick-up in the rate of decline in both output and employment was due to the construction and services industries. The construction sector posted its fastest rate of employment decline in almost 2 years last month. These job losses, coupled with a reduction in staffing levels within the service sector, resulted in the steepest decline in overall employment levels since November 2010.
“This latest feedback from the Northern Ireland business community on private sector conditions confirms the significant challenge facing policy-makers and the local economy. Pro-economy, pro-business measures are extremely welcome. The economy also needs a larger stimulus, and this is the context within which a lower rate of corporation tax is being sought.”
The main findings of the October survey were as follows:
Steep reduction in output
Business activity in the Northern Ireland private sector decreased for the eleventh successive month in October. Moreover, the rate of contraction quickened to the fastest since March.New business declined substantially again during the month, with the reduction in Northern Ireland contrasting with modest growth at the UK level. Falling demand alongside strong competition for new work had reportedly led to the latest decrease.
Job shedding continues
As has been the case in each month since December 2011, employment in the Northern Ireland private sector fell in October as companies responded to declining workloads. Staffing levels were cut at a sharper pace in Northern Ireland than seen across the UK economy as a whole. With new orders decreasing, firms worked through outstanding business. The latest depletion of backlogs of work extended the current sequence of decline to five years.
Further sharp increase in input prices
Input cost inflation was recorded again in October, partly reflecting higher fuel costs.In spite of another sharp rise in input costs, Northern Ireland companies continued to lower their output prices amid strong competitive pressures. That said, the pace of reduction slowed for the second consecutive month. The solid fall in charges at Northern Ireland firms contrasted with a marginal increase at the UK level. Output prices have now decreased in each of the past nine months.