Private sector business growth falls to 28-month low as companies reduce staff
PRIVATE sector business growth in the north has fallen to its lowest level in over two years, according to the latest PMI data.
The Ulster Bank Northern Ireland PMI (Purchasing Managers' Index) report shows that business activity rose at its weakest rate in 28 months, with companies reducing staffing levels for the first time in four years.
Despite the reduction in operating capacity, backlogs of work continued to fall, extending the current sequence of depletion to six months. Panellists also reported working through outstanding business, partly due to a lack of new orders.
Output growth was registered in the manufacturing, services and construction sectors, while retail activity decreased.
Input prices rose to a five-month high, according to the figures, while a weaker Sterling rate contributed to greater material costs. Staff costs were also reportedly higher in January, while charges rose sharply to the greatest extent in three months.
Looking ahead and the outlook for business activity was the most positive in January that it has been in four months, however this remains at a low base, largely to ongoing Brexit uncertainty.
Ulster Bank chief economist, Richard Ramsey the trend of slowing growth has continued into 2019 from last year.
"Looking at the order books of firms, which have been broadly flat for the past two months, suggests that subdued growth might be with us for some time," he said.
"One of the most significant findings of the latest survey relates to employment. Whilst 2018 was characterised by a buoyant labour market, a record high in private sector jobs, and growing skills shortages, we are now perhaps at a turning point.
"The latest survey reports that staffing levels fell for the first time in four-years. Indeed, the Employment Index dropped to a 67-month low. Job losses in the services sector are the primary driver of this emerging weakness."
"The fact that Northern Ireland's private sector has started the new year in a relatively weakened position is perhaps not surprising. Of concern perhaps is that the fact that both of our key external markets - the rest of the UK and the Republic of Ireland – are also seeing slower rates of growth, with the UK economy actually approaching stall-speed. As the Governor of the Bank of England recently highlighted, this year could be the weakest rate of growth that the UK experiences in over a decade," Mr Ramsey added.