NI Private Sector Suffers 'Stagnation'

The private business sector in NI is heading into the doldrums with news today that predicts stagnation in private sector activity, even though there was only a moderate contraction in the previous month.

November data from the Ulster Bank Northern Ireland Purchasing Managers' Indexes (PMI) said Northern Ireland private sector firms reported no change in business activity since the preceding month.

Despite bringing an end to a 23-month period of contraction, the index has now failed to signal outright expansion of output for four years.

The latest survey findings revealed that manufacturing was the only sector to record activity growth in the latest survey period.

Incoming new orders received by private sector firms fell again during November, although the rate of decline was just marginal.

Moreover, the latest decrease was the slowest in the current four-year period of reduction. Companies reported that muted demand had contributed to the overall decline in new orders.

Spare capacity persisted in the Northern Ireland private sector, with outstanding business falling at a solid rate during November.

Despite accelerating since October, the rate of backlog depletion was the second slowest in 44 months.

November data showed that companies added to their staff numbers for the first time since February 2008. Although the pace of expansion was only modest, it contrasted with job shedding across the UK economy as a whole.

Costs Up

Average input costs faced by private sector companies increased sharply during November, with the rate of inflation accelerating to the strongest in five months.

Moreover, the latest increase in average costs was sharper than the UK-wide figure to the greatest extent since data were first compiled in August 2002.

Respondents to the latest survey noted that cost inflation reflected a combination of higher raw material and labour-related costs. There were also reports of rising energy prices.

Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: "Since the global economic recovery began in mid-late 2009, the various international PMI surveys have broadly followed the same path.

"Similarly, over the last six months concerns surrounding the euro zone have contributed to a marked slowdown with many economies posting outright contraction (below the 50 threshold). Indeed, the composite index for the euro zone has recorded sub-50 readings in each of the last three months.

"As far as the Northern Ireland PMI is concerned, it certainly did not follow the herd in terms of the post-2009 recovery.

"Equally, however, over the last few months it has been bucking the wider trend with its business activity index rising as opposed to falling. Last month this index hit 50.0 (neither expansion nor contraction), which marks the end of a 23-month period of contraction.

"Despite this sign of improvement, Northern Ireland's private sector have failed to record growth for four years," he said.

On jobs, retailers actually increased staffing levels ahead of the busy Christmas season that marked the first rise since March 2008.

However, firms within the construction and services sectors continue to report job losses.

"Of more concern is the continued divergence within the local construction and services industries.

"The pace of decline remains relatively steep for Northern Ireland firms whereas the UK equivalent sectors continue to report growth," said the Ulster Bank expert.

(BMcC)