Downturn deepens in Northern Ireland private sector
Today sees the release of June data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – signalled a deepening downturn in the Northern Ireland private sector. Brexit uncertainty led to sharper falls in output and new orders, with firms pessimistic regarding the 12-month outlook.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“In the early part of 2019, it was difficult to get a true handle on where the Northern Ireland private sector was. We had a range of manufacturing firms stockpiling due to Brexit, which in some respects skewed the output figures. Now that the period of intensive stockpiling has passed, we are perhaps getting a truer reflection of the real state of play. And what we are now seeing is that all of the PMI’s key indicators declined over the first half of the year, including output, employment, new orders and exports. After six years of growth, it appears that the economic cycle has turned. The severity or otherwise of that downturn will depend on a range of factors. The kind of Brexit that we see will of course be a major factor. But what is in no doubt is that the private sector overall is currently in a weaker state.
“Of particular concern are new orders and exports. Both domestic and overseas order books are contracting at a rapid rate, which suggests that activity will be subdued in the coming months. Indeed, export orders fell at their fastest pace in almost eight years. The manufacturing sector appears particularly weak at present, with output falling at its fastest pace in June for more than a decade. However, all sectors were in decline in June, with construction and retail also seeing very marked declines in activity.
“Northern Ireland is not alone in seeing a marked deterioration in business conditions in June. The UK as a whole reported a slump in manufacturing and construction activity as well, while service sector activity slowed to near stagnation. Global manufacturing is also in a downturn with US / China trade wars having a dampening effect. However, Northern Ireland’s downturn is more pronounced than the UK’s. Indeed, Northern Ireland’s private sector posted the fastest rates of decline in output, new orders and employment of all the UK regions last month.
“However, it needs to be remembered that the Northern Ireland labour market is cooling from record levels, and indeed many firms who were having difficulty recruiting may not see that as entirely a bad thing. The decline in the employment figures in the latest PMI is therefore not concerning at this stage. The challenge will be whether that trend continues into the six and 12 months ahead.”
The June PMI report for Northern Ireland and the NatWest report for the UK regions are attached for your information. Further PMI material including a chart pack, podcast and infographics are available at www.ulstereconomix.com