No change in output during September
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“While growth in the UK economy as a whole continued to recover from the surprise vote to leave the EU in late-June, the latest PMI data signal that firms in Northern Ireland are facing a much more difficult time of things at present. Data for August had shown a return to growth of business activity, but this has been followed in September with a month of stagnation. Moreover, local firms have yet to see a return to rising new business since the referendum, with new orders broadly unchanged in the latest survey period.
“There were a couple of bright spots within the latest set of numbers which provide some cause for encouragement. Firstly, the rate of job creation picked up, suggesting that firms maintain some optimism that workloads will start to rise again in coming months. Secondly, companies continued to see the benefit of a weak pound in export markets, with new business from abroad increasing at the sharpest pace in more than two years.
“Sterling weakness has its downsides, however, and the effect on costs for businesses is clearly demonstrated by the PMI data. Input prices continued to surge in September, and local firms often passed these on to clients by way of higher charges. Increased selling prices were mentioned by those respondents that saw new orders decline as customers were reluctant to commit to new projects.
“Inflationary pressures in terms of both input costs and output prices were greatest in the manufacturing and retail sectors. Meanwhile, construction firms reduced their charges in spite of a strong pick-up in cost burdens as they attempted to secure new work in a challenging economic environment. These efforts were often in vain, however, as new business decreased sharply and output contracted for the sixth month in a row. Local constructors also reduced their staffing levels in September, the only sector to do so.
“There were signs of weakness in manufacturing at the end of the third quarter, with new orders falling for the first time in seven months and production growth slowing accordingly. Elsewhere, services saw a modest return to expansion in new business, but their activity was little-changed. Retail saw the strongest rise in activity of the four sectors.
“The overall picture is one of firms struggling to secure new work in the wake of the vote to leave the EU, with the notable exception of those companies able to capture additional export business. Recent noises that the UK government could favour a ‘hard-Brexit’ will likely do little to reassure local firms.”