Sat 6th Jul 2013
Ulster Bank Northern Ireland PMI – January 2011
By Richard Ramsey, Chief Economist, Ulster Bank
Following the weather-related disruption to business activity in December, UK firms posted a significant rebound in output and new orders in January. Northern Ireland firms also witnessed some improvement, but only insofar as the pace of decline in private sector output and new business eased. In fact, Northern Ireland was the only UK region where firms continue to report falling levels of business activity and new orders in January. This highlights that the underlying weakness within the local economy, and continued divergence with the rest of the UK, remains a feature at the start of 2011. The growing disparity is most evident with the new orders index with the differential between Northern Ireland and the UK now at its widest margin since the survey began. The greater exposure of local firms both to the Republic of Ireland and the public sector cuts, relative to their counterparts within the UK, are key explanatory factors behind this trend.
Whilst all sectors reported falling output, new orders and employment levels, the manufacturing sector remains the best performer. Indeed, manufacturing employment levels have fallen only marginally over each of the last four months. Meanwhile, firms within the service sector reduced their staffing levels in January at the weakest rate in 12 months. However, the continued rapid decline in new orders, in both the services and construction industries, suggests pressure on workforce numbers in these sectors will intensify later this year.
Not surprisingly, local firms are signalling the fastest rate of input cost inflation since the record highs of mid-2008. As a result, despite weak demand and intense competition, local firms have raised their prices for the first time since September 2008, in an effort to minimise the squeeze on profit margins. Nevertheless, the pressure on profitability in January was its most intense since the survey began.