Today sees the release of December data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – pointed to a further solid expansion of business activity in the Northern Ireland private sector, linked to another strong rise in new orders.
Increased workloads led to an accumulation of outstanding business and the fastest rise in employment since mid-2007. Meanwhile, both input costs and output prices increased at sharper rates than seen in November.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: “The Northern Ireland economy ended 2013 in a lot better shape than it began the year. Indeed, last year can be viewed as a game of two halves. During the first half of 2013 local firms reported falling levels of output, orders, exports and employment.
“However, the summer heralded the start of a strong, broad based recovery with all sectors experiencing a significant improvement in these indicators. As a result, 2013 marked the first year of growth in employment, new orders and business output in 6 years. As far as private sector output growth was concerned, 2013 also represented the first time since 2007 that Northern Ireland was not at the foot of the UK regional performance table.
“Overall, the Northern Ireland economy is estimated to have grown by at least 1% in real terms. 2014 should see even stronger rates of growth of at least 1.5%. The latest PMI for December signalled a moderation in the rate of growth in business activity.
“However, an easing in the pace of growth relative to earlier months was inevitable sooner or later. All sectors posted strong rates of growth in new orders and business activity in December and this bodes well for 2014. To date the rise in new business orders has been largely due to increasing demand from Great Britain rather than export markets such as the Republic of Ireland and markets further afield.
“Last month however, local firms reported their fastest rate of growth in export orders since October 2007. This is probably linked to improving economic conditions in our largest export market – the Republic of Ireland.
“The most encouraging aspect of the latest survey concerns employment. Last month local firms saw their staffing levels increase at their fastest rate since the beginning of the credit crunch in August 2007. All sectors of the economy increased staffing levels in December.
“However, the pick-up in the rate of job creation was due to the retail industry and the wider services sector in particular. Local retailers increased their staffing levels at their fastest rate since the survey began. Whilst job numbers in the wider service sector are rising at their fastest rate in 6 years.
“The road ahead looks much more promising than it did this time last year. However, not all business conditions have improved over the last 12 months and the economy is not without significant challenges. Inflationary pressures are a growing concern across all sectors particularly manufacturing. Rising wage costs, a sign of economic recovery as pay rises return, is cited as a factor. That said, unlike this time last year, firms now have a degree of pricing power and can pass some of these costs onto their customers.”
The main findings of the December survey were as follows:
Business activity rises at solid pace
The headline seasonally adjusted Business Activity Index remained well above the 50.0 no-change mark in December, posting 56.5 from 60.2 in November. The rate of growth remained solid, despite easing to the weakest since July. All four sectors signalled growth of activity, with the strongest increase at retailers. New orders continued to rise sharply, with the rate of growth dipping only slightly from November’s recent high. Panellists reported that greater sales efforts and improving sentiment among clients had contributed to rising new business. New export orders also increased during December, and at the sharpest pace since October 2007.
Rate of job creation accelerates
Another strong rise in new business led to a further accumulation of backlogs of work at Northern Ireland companies, with the rate of accumulation much faster than across the UK as a whole. In fact, the accumulation of outstanding business was one of the strongest in the history of the series. Rising workloads also encouraged firms to take on extra staff. Employment increased for the sixth successive month and at the fastest pace since August 2007.
Faster rise in input costs
A further sharp increase in input prices was recorded, with the rate of inflation picking up to the sharpest since September. Some panellists indicated that higher staff costs had been the main factor leading to rising input prices. Companies responded to higher input costs by increasing their selling prices. Prices charged rose for the sixth month running, and at a solid pace that was faster than recorded in the previous month.