Rate of decline in activity slows sharply in June

Today sees the release of June data from the Ulster Bank Northern Ireland PMI^®. The latest report – produced for Ulster Bank by IHS Markit – indicated that the Northern Ireland private sector continued to be impacted by the coronavirus disease 2019 (COVID-19), seeing further reductions in output, new orders and employment. That said, rates of decline softened amid a loosening of lockdown restrictions.

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

“June marked the end of a quarter Northern Ireland’s private sector has never seen the like of before. Unsurprisingly the latest Ulster Bank Northern Ireland PMI therefore confirms record rates of decline in output, orders, exports and employment during this period. But while the quarterly data is bleak, this conceals tentative signs of a recovery on a month-to-month basis.

“April, the first full month of lockdown, marked the all-time-low with rates of decline in output easing in May. A loosening in the lockdown restrictions in June has seen this trend continue. Indeed, last month was the first time in eight months that any sector returned to growth.

“Manufacturing was the best performer in June, reporting expansion in output and orders for the first time in eight and fifteen months respectively. 46% of local manufacturers reported an uptick in output in June. While manufacturing remains a bright spot for output and orders growth, it remains a black spot for employment though. Staffing levels continued to fall at a rapid pace in June with firms cutting staff outnumbering those increasing their headcount by four to one.

“It is a similar picture within retail, with sales activity stabilising but firms still cutting staff at a rapid rate. Retail and the hospitality sector (part of services) have been the most adversely affected by the social distancing / lockdown restrictions. Reopening of businesses has been accompanied by a surge in costs linked to personal protective equipment (PPE). Retailers saw their input costs rise at the fastest rate in 33 months.

“The continued lockdown of the hospitality industry in June weighed on the wider services sector. Last month services firms continued to report rates of contraction in output and orders not seen before COVID-19. It is noted that fewer than 1 in 4 service sector firms reported a pick-up in business activity in June. This should improve significantly in July with the reopening of bars and restaurants. Measures announced in the Chancellor’s Economic Statement such as the temporary reduction in the VAT rate from 20% to 5% will also provide a much-needed shot in the arm for the hospitality sector. It may also help boost confidence in Northern Ireland’s private sector which continues to be the most pessimistic region in the UK for output growth in 2021.”

The June PMI report for Northern Ireland, the NatWest report for the UK regions and the Republic of Ireland’s Construction are attached for your information. Further PMI material including a chart pack, podcast and infographics are available at www.ulstereconomix.com