Business activity in Northern Ireland stopped falling for the first time in 23 months in November, signalling the economy will soon return to growth, according to a report released today.
The latest Ulster Bank PMI report showed activity in the private sector remained unchanged last month, although new orders and outstanding business continued to decrease. Staffing levels also fell but at a much slower rate than at the start of the year.
Richard Ramsey, chief economist for Northern Ireland at Ulster Bank, said: “Back in August, we flagged that Northern Ireland's private sector should return to positive growth before the end of the year.
“The latest PMI survey for November brings to an end twenty-three consecutive months of falling levels of business activity. Although the latest Business Activity Index was spot on the 50 figure, which is the threshold for expansion and contraction, in our view it is consistent with a return to overall private sector growth.”
All sectors, bar construction, improved in November with the retail and services sectors recording growth, with the retail sector experiencing its strongest activity since the credit crunch began in August 2007, the report said.
“Clearly, this has been driven by the influx of shoppers from the Republic.
“However, recent Irish budget measures, concerning VAT and lower alcohol duties, will begin to erode the current North/South price differential,” said Mr Ramsey.
“With output prices falling for the last 14 months in a row and input costs rising for nine consecutive months, the health of Northern Ireland’s corporate finances remains a growing concern.
“The pressure on profit margins eased slightly during the month but this was not the case with the manufacturing sector.
“Indeed, the latter experienced a further rise in input costs in November with pricing power remaining weak.
“As a result, manufacturing continues to experience the greatest squeeze on profit margins of any sector. This is likely to lead to further manufacturing job losses in the New Year,” he said.
Survey participants reported that they were still cautious about staffing levels given the difficult economic environment.
Levels of incoming new work received by Northern Irish private sector companies fell again in November, extending the current period of reduction to two years.
The rate of decline in new orders remained solid, but was far slower than that seen at the start of the year.