Posted on Monday 16 April 2012 by Ulster Business
Ulster Bank economist Richard Ramsey
The Ulster Bank Northern Ireland PMI indicated a sharp reduction in activity during the month, with the seasonally adjusted business activity index dropping to 40.1 from 45.3 the previous month.
Index readings above 50.0 signal an increase on the previous month while readings below 50.0 signal a decrease.
The March survey showed private sector output declining for the fourth consecutive month, with the reduction in new orders the sharpest since August 2011. More companies also cut jobs as a result of lower workloads, the survey showed.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist for Northern Ireland at Ulster Bank, said: “The UK’s set of PMI surveys all exceeded City expectations and pointed to a further acceleration in business output growth in March. Meanwhile, the composite survey (comprising of all sectors) for the Republic of Ireland is also improving, and posted its second successive month of positive growth last month. Ultimately, improvements in these two economies, if sustained, will have a positive influence on the performance of the Northern Ireland economy.
“However, unlike its counterparts in GB and the RoI, the latest PMI survey for Northern Ireland is not encouraging. According to data gathered from businesses about their performance, Northern Ireland’s private sector experienced a further deterioration in business conditions across all sectors last month. There were steep falls in both business output and new orders, with private sector firms indicating that they have reduced employment levels for the fourth month in a row. But, it should be remembered that not all firms are following this wider trend. There are firms reporting a rise in both output and new orders. However, the problem is there are around twice as many firms signalling declines. As a result, there are insufficient drivers of growth to stabilise the local economy at present.”
At a sector level, the economist noted that Northern Ireland’s retailers have witnessed a sharp reversal in their fortunes following a brief period of growth over Christmas and the New Year. The wider service sector posted a marked decline in new business and activity in March, although the pace of job losses has almost stabilised, he added.
“It will be interesting to see whether the anticipated surge in tourist numbers in the year ahead will feed through into the wider service sector and offset some of the ongoing service sector decline,” said Ramsey.
“From a global exporting perspective, prospects remain brightest for the manufacturing sector. That said, the recent purple patch enjoyed by local manufacturing firms has faded significantly. Not only are manufacturing firms reporting significant declines in output and new orders, they are now experiencing greater inflationary pressures. As a result, manufacturing firms are experiencing a squeeze on profit margins. However, the scale of these concerns pale into insignificance when compared to the ongoing difficulties in the construction sector. The biggest hope for the latter is exploiting the opportunities that exist in Great Britain.”