Today sees the release of April data from the Ulster Bank Northern Ireland PMI®. The latest report indicated that a further sharp rise in new orders fed through to continued growth of business activity in Northern Ireland’s private sector. Business confidence also remained elevated and firms upped the pace of job creation. Meanwhile, input costs increased rapidly, but the pace of selling price inflation softened.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:
“Northern Ireland’s private sector continued in expansion mode at the start of the second quarter. Local firms chalked up their fifth successive monthly rise in business activity in April, albeit the pace of growth was slower than in March. Services, construction, and retail all reported slower rates of output growth in the latest survey while manufacturing bucked this wider trend. Manufacturers posted their fastest rate of output growth in twenty-five months during April. Outside of the pandemic period it was the strongest rate of manufacturing output growth since September 2014.
“Three of the four sectors witnessed a pick-up in new orders with only services reporting a slowdown. Manufacturers recorded their best month for new business in two years while construction firms reported their highest rates of new orders in three-and-a-half years. The latter is somewhat flattering given how subdued construction activity has been in recent years.
“Rising demand was accompanied by the first increase in backlogs of work in twelve months. Firms have responded by increasing their staffing levels at a faster rate than all other UK regions.
“Inflationary pressures intensified last month with input costs rising at their fastest clip in twelve months. The increase in shipping costs was cited alongside rising wages and specifically the April uplift in the National Living Wage. These cost pressures are most apparent amongst retailers with this partly due to the significant lengthening of suppliers’ delivery times and increased costs resulting from the ongoing Red Sea disruption.
“Encouragingly, local firms remain very optimistic about output in twelve months’ time. The number of firms expecting output growth outnumbers those anticipating a decline by more than four to one. The construction industry is the most optimistic about future output since the question was added to the survey over seven years ago.
“Overall, the latest survey offers encouraging signs about the state of the local private sector. However, the challenges facing the public sector remain and these will impact on parts of the private sector in due course.”
The main findings of the April survey were as follows:
Although the headline seasonally adjusted Business Activity Index dipped to 54.5 in April from 56.6 in March, the reading still signalled a marked monthly rise in business activity during the month. Output has now increased in each month since December. Output increased across all four monitored sectors, led by manufacturing where the pace of expansion quickened to a 25-month high. New orders increased sharply, with the rate of growth only slightly weaker than that seen in March. Meanwhile, new export orders neared stabilisation.
Optimism that the current positive trends will continue over the next 12 months supported strong confidence in the outlook among companies in April. Sentiment was among the highest since the series was added to the survey in March 2017. The rate of job creation quickened for the second consecutive month and was the fastest since August last year. The solid rise in employment was not sufficient to prevent a build-up of backlogs of work, however, as the strength of new order growth meant that outstanding business rose for the first time in a year. Wage increases and higher shipping costs led to a sharp and accelerated increase in input prices. Output prices also rose, but the rate of inflation eased from the previous month.
