Current sequence of output growth extends to one year in April

Today sees the release of April data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – signalled a further solid increase in output, supported by ongoing growth of new work. That said, rates of expansion eased from the previous month. Meanwhile, the introduction of the National Living Wage was reported to have contributed to a quicker rate of cost inflation, with firms raising their output prices modestly.

Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:

“Northern Ireland’s private sector notched up its twelfth consecutive month of growth in April. While the rates of expansion in business activity and new orders eased relative to the eighteen-month highs recorded in March, the pace of growth remained relatively strong. Furthermore, the rates of growth in new orders, business activity and employment amongst local firms exceeded the UK average. The UK’s private sector output expanded at its weakest growth rate in three years in April with the services and construction industries posting subdued rates of activity. Meanwhile UK manufacturing fell into contraction territory for the first time in over three years. The UK economic slowdown is somewhat concerning and if sustained will impact on Northern Ireland in due course.

“Whilst Northern Ireland’s private sector reported a moderation in the rates of growth in new orders and business activity, three other indicators saw a pick-up in their respective growth rates. The pace of job creation accelerated in April with all sectors increasing their staffing levels. Manufacturing’s seven month sequence of job losses also came to an end. Export orders expanded at their fastest rate in twenty one months, buoyed up by a competitive sterling / euro exchange rate and strong demand from the Republic of Ireland. However, sterling weakness is a double-edged sword with rising import prices contributing to a marked acceleration in input cost inflation in April. Input cost inflation hit a two-year high in April due to the weakness of sterling, higher fuel costs and the introduction of the National Living Wage. The services sector reported the highest rates of input cost inflation in April.

“Northern Ireland’s growth performance remains reliant on services and retail. Retailers continue to report the fastest rates of job creation. Last month the construction sector joined manufacturing in contraction territory. This is evidence of the slowdown in the UK construction market impacting on local firms working in the GB market. Construction output and new orders contracted in April for the first time in eight months. The reversal in fortunes for construction orders was quite stark, moving from healthy rates of growth in March to rapid rates of decline in April.

“Overall, the latest Ulster Bank PMI confirms that current business conditions remain favourable. The private sector is increasing staffing levels at a faster rate than occurred before the downturn. However, the rate of output growth, although relatively strong, remains below the long-term average that pre-dated the downturn. The performance of the UK economy is the most significant influence on the local economy. From this perspective, the marked slowdown in the UK economy, coupled with the uncertainty linked to the forthcoming EU referendum, is perhaps somewhat worrying.”

The report, infographic and podcast are available on the site

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