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Weak pound pushes up Northern Ireland exports but prices are climbing too, study finds

By John Mulgrew

Northern Ireland exports have risen to a record high, with local business activity bolstered by strong retail sales, according to a survey released today.

Overall business activity is up across the province, rising roughly in line with the UK as a whole, the latest purchasing managers' index from Ulster Bank showed.

It claimed that while the collapse of sterling fuelled the growth in exports, the rate of input cost inflation quickened and companies raised their output prices sharply in November.

"Growth of total new orders was supported by a record rise in new business from abroad," the report read.

"Panellists reported higher export orders from the Republic of Ireland, linked to the weakness of sterling against the euro."

Retail enjoyed the fastest rise of the four sectors, while growth was also recorded in manufacturing and services. But construction continued to fall.

Job creation increased for the 22nd month in a row, but the figures suggested it was beginning to stall, with the rate rising at its slowest pace since June 2015.

"The first three quarters of 2016 saw a deceleration in growth in Northern Ireland's private sector," Richard Ramsey, the chief economist at Ulster Bank, explained.

"However, following stagnation in the third quarter, the final three months of the year are shaping up to be much better.

"Indeed, business activity accelerated further in November, with the rate of expansion representing an eight-month high.

"Meanwhile, new orders returned to growth for the first time in five months, with local companies' order books expanding at their fastest rate since September 2014.

"This suggests that the economy has regained some momentum going into 2017."

The report also said that a number of respondents signalled the "passing on of higher input costs to clients", and as a result output prices increased at their fastest rate since August 2008.

However, despite strong sales in manufacturing, Mr Ramsey said the sector was not without its challenges.

"Chief amongst these is inflation," he added. "The downside of a weak currency is import price inflation. Northern Ireland's manufacturing firms have recently seen their input cost inflation hit a 99-month high.

"As a result, manufacturers increased the price of their goods at the fastest rate on record. Retailers are also experiencing the highest rate of cost inflation in over eight years. Consumers should therefore brace themselves for significant price rises in 2017."

The chief economist also noted that while the picture was positive at a "headline level", the underlying reality was "something of a mixed bag".

"The positives include export orders and the strong performance of the retail and manufacturing sectors," he said.

"The challenges include inflation, the slowdown in employment growth and the under-performance of the services and construction industries.

"Export orders increased at a record rate in November with the pace of expansion eclipsing the previous high by some margin.

"Sterling's depreciation has boosted the competitiveness of manufactured products in export markets. Manufacturing output and new orders hit 25-month and 17-month highs respectively."

Mr Ramsey also admitted, however, that the "imbalance" in growth was "somewhat concerning". "This and the prevalence of inflation will be amongst the key watch-outs in 2017," he said.

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