Pace of recovery is accelerating
Today sees the release of January data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by Markit – signalled that the recovery in the Northern Ireland private sector gathered momentum at the start of 2014 as growth of new business reached a survey-record high. This in turn contributed to faster rises in output and employment. On the price front, both input costs and output prices rose at similar rates to those seen at the end of 2013.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“The Northern Ireland economy has started 2014 the way it ended 2013 with the broad-based recovery continuing to gather momentum. In recent months, the Ulster Bank PMI reports have been peppered with survey highs. January’s report continues this theme and signals that rather than slowing down, the pace of economic recovery is in fact accelerating. All sectors of the economy reported record highs of some form or another across a range of performance indicators.
“Last month local firms posted a marked acceleration in the rate of growth in business activity. Indeed, firms reported their fastest rate of growth in almost 10 years with January’s growth rate exceeded on only one other occasion since the survey began. Furthermore, the pace of growth recorded by Northern Ireland’s private sector exceeded their counterparts in the equivalent UK survey for the first time since October 2007. Whilst all sectors reported strong rates of growth, the acceleration was largely due to improved performance by the services and manufacturing sectors. Indeed, the latter posted its second fastest growth rate in the survey’s history.
“The forward looking new orders index suggests there is still plenty of growth in the pipeline across all sectors. A surge in new business for manufacturers and a record rise in new orders for service sector firms helped propel the overall new orders index to a record high. That is, local firms have seen their order books expand at their fastest rate since at least August 2002.
“Encouragingly, the improved business conditions have translated into significant levels of job creation. Firms within manufacturing, construction and retail all increased staffing levels at a faster rate in January relative to the previous month. Furthermore, both local manufacturers, and perhaps surprisingly retailers, increased their employment levels at the fastest rate in the survey’s history.
“Not to be outdone by the survey highs reported in other sectors, Northern Ireland’s construction firms reported the fastest rise in prices for their services since data became available almost 5 years ago. The return of demand has restored some pricing power. However, construction firms are now experiencing the fastest rate of input cost inflation in 20 months. Despite these inflationary pressures, it is still pleasing to note that the construction sector is posting healthy growth rates in terms of output, orders and employment.”
The main findings of the January survey were as follows:
Record rise in new orders
Companies in Northern Ireland posted the strongest rise in new business since the survey began in August 2002, reflecting improved success in securing new contracts. Moreover, the rate of growth in Northern Ireland was faster than seen across the UK as a whole. Services companies posted the strongest rise in new business, while only construction saw the rate of expansion ease from December. A strong expansion in new orders contributed to another monthly rise in activity in January, as highlighted by the headline seasonally adjusted Business Activity Index posting 60.4, up from 56.5 in December. The rate of expansion was the sharpest since March 2004, while Northern Ireland outperformed the UK average for the first time in more than six years.
Rate of job creation quickens
Rising workloads led to a seventh successive monthly increase in employment at Northern Ireland companies. The rate of job creation was marked, and accelerated for the second month running to the strongest since July 2007. The manufacturing and retail sectors posted the sharpest rises in staffing levels. Despite this increase in capacity, the rise in new orders was such that backlogs of work continued to accumulate in January.
Rates of inflation little-changed
Both input prices and output charges rose at broadly similar rates to those recorded at the end of 2013. Panellists reported that the latest increase in input prices reflected higher salary payments and rising raw material costs. Attempts to pass on higher input costs to clients led to a seventh consecutive rise in selling prices in Northern Ireland.