Surging price rises lead to fall in new orders
Today sees the release of October data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – signalled that surging price rises acted as a brake on the Northern Ireland private sector, restricting growth of business activity and contributing to a decrease in new orders. Both input costs and output prices rose at new record rates. On a more positive note, companies expanded their staffing levels at a sharp and accelerated pace.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“The sustained period of inflation and supply chain pressure are starting to bite on business performance. The rate of growth in business activity slowed during October while input cost inflation rose at a record rate. This isn’t surprising given the incoming news flow regarding energy costs and firms are passing these costs onto their customers by raising the prices of their goods and services at a record rate. Perhaps the most telling indicator is new orders which shows that incoming business fell for the second month running with all sectors bar manufacturing posting a fall in new orders. Construction saw the steepest decline, with firms citing price increases as a factor putting off customers. The one indicator that did improve in October was employment. Firms reported one of the fastest increases in headcount in the survey’s history. Manufacturing led the way in this, with firms in the sector posting the fastest rate of job creation on record. They are recruiting at pace to increase their capacity to deal with a buoyant order book and mounting backlogs.
“The inflationary pressures and supply chain disruption aren’t just impacting on the here and now, they are also impacting on the outlook. Survey respondents’ expectations for activity in 12 months’ time slipped to a nine-month low. Whilst manufacturing, retail and services firms still expect growth, construction businesses expect activity to fall. The latest survey’s theme of slower growth, higher inflation and supply chain disruption are expected to continue in the run-up to Christmas.”
The October 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