Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“The PMIs for July saw an increasing number of economies, at an international level, fall below the ‘50 reading’ that acts as the threshold between expansion and contraction. Global manufacturing output fell for the second successive month in July and in the process posted its lowest reading since May 2009. The Eurozone, the UK and Australia all saw manufacturing output fall at a rapid rate. Conversely, the Republic of Ireland bucked the downward trend in manufacturing output experienced by its European counterparts with one of the strongest PMI readings globally last month.
“The health of the UK economy is the most important determinant of economic growth and prosperity within Northern Ireland. Last week the Bank of England Governor, Mervyn King, did not mince his words when he highlighted the UK economy’s poor performance and the challenging short-term outlook. Last month the UK PMI dipped into contraction territory for the first time since April 2009. Seven UK regions joined Northern Ireland in July in contraction territory with London, Scotland and the Midlands the only UK regions to post a rise in business activity. The rapid rate of decline in output within Northern Ireland’s private sector last month eased markedly relative to the second quarter. Nevertheless, Northern Ireland’s PMI has still not crossed the expansion threshold since November 2007 and the beginning of an economy-wide recovery remains a long way off.
“In Northern Ireland, manufacturing is the top performer at a sector level. Manufacturing output stopped falling in July for the first time in 2012, following the rapid growth in Q4 2011. Meanwhile manufacturing new orders were also on the rise again for the first time in seven months. However, Northern Ireland will not be immune from the global manufacturing downturn that is gathering pace. Therefore sustaining this recent rise in output and orders is unlikely. Outside of manufacturing, the marked divergence between Northern Ireland’s services and construction sectors and elsewhere in the UK continues. Similarly, Northern Ireland’s private sector as a whole continues to report job losses whilst UK firms continue to report rising employment levels. It should be remembered though that whilst Northern Ireland’s private sector in aggregate continues to report falling levels of output, orders and employment there have consistently been many firms bucking this wider trend.”
The main findings of the July survey were as follows:
Activity down at slower rate
Business activity in the Northern Ireland private sector decreased further during July. However, the rate of decline eased to the weakest in the current eight-month period of contraction. Three of the four monitored sectors noted a decline in output, with manufacturing the exception.
Behind the slower decline in business activity was a less pronounced reduction in new work received by private sector firms. The latest decrease in new orders was only modest and the least marked in eight months. This contrasted with the sharp pace of reduction registered in June. Underlying demand weakness and the uncertain economic outlook were cited by panellists as the main factors contributing to the overall decline in new work.
Job shedding eases
Staff numbers in the Northern Ireland private sector decreased again during July, extending the current period of decline to eight months. The rate of job shedding was only modest, however, and the weakest in three months. Survey respondents generally noted that they remained hesitant with regards to staff hiring amid ongoing new order book weakness.
Output price discounting slows
Average input costs faced by Northern Ireland private sector firms rose in July at a stronger rate than seen during the previous month. Companies commented on higher prices paid for energy and fuel. However, the overall rate of input price inflation remained weak in the context of historic data. Firms continued to lower their output charges in July, but the rate of price discounting was only modest and the slowest in three months.