Brexit impact 'hasn't bitten' but storm clouds gather says PMI report

The north's manufacturing sector hasn't been hit by the Brexit vote - nine months on
Gary McDonald Business Editor

NINE months on, Brexit still hasn't hampered Northern Ireland's economy, a closely-watched business barometer reveals.

The manufacturing, retail, services and construction sectors all grew in March, according to Ulster Bank's PMI report.

But the storm clouds of uncertainty are gathering, with businesses set to face additional taxes and costs in April such as the increase in the National Living Wage and the Apprenticeship Levy.

And the cost of consumers' shopping baskets, as well as their energy bills, are rising at close to record levels, which will filter through into slower spending.

"There are a few concerns for the private sector in the months ahead,” Ulster Bank's regional chief economist Richard Ramsey said.

The PMI data show a solid rise in business activity to end a positive first quarter of the year, with increases in new orders and employment in those businesses surveyed by Markit for the bank.

Ramsey adds: “Ever since the UK's vote to leave the EU, Northern Ireland's private sector has maintained its growth momentum, and overall the economy has fared better than expected in the wake of the Brexit decision, with the main impact, positive and negative, being the weakening of sterling.

"But the long-term economic implications will only become apparent as what Brexit actually means becomes clear.

"For now though, all segments of the private sector are maintaining growth in output and employment to varying degrees, with job creation rising for the 26th month in a row."

The survey showed inflationary pressures remain prevalent, with the effects of sterling's weakness continuing to feed through into firms' input costs, and the prices they charge to customers.

Retail and manufacturing input cost inflation eased from record highs, while construction and services firms saw their cost-base accelerate – the latter to a 70-month high.

“Whilst the negative effects of the weak sterling are very apparent in the latest data, so are the positives, with exports continuing to grow strongly, albeit at a slower rate, and cross-border shopping boosting retail," Ramsey says.

"Maintaining export growth into the months ahead will help the private sector continue to expand. However, the key concern is the dependence on retail sector growth in an environment of rising prices and pressure on consumers' pockets."

He added: "Retail prices are rising at almost a record rate, with further rises in food and energy prices set to filter through in the coming months. Alongside a freeze in a range of benefits to 2020, this will firmly consign the consumer sweet spot to the past.

"But consumers are not alone, with businesses set to face additional taxes and costs, such as the increase in the National Living Wage and the Apprenticeship Levy.

"Uncertainty and higher costs will be two main concerns for the private sector in the months ahead,” said Ramsey.

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