Business

Private sector declined for tenth month running in December, but at softer rate amid more Brexit certainty

Businesses increased their staffing levels for the first time in a year during December amid reduced uncertainty around Brexit
Businesses increased their staffing levels for the first time in a year during December amid reduced uncertainty around Brexit Businesses increased their staffing levels for the first time in a year during December amid reduced uncertainty around Brexit

BUSINESS activity in the north fell for the tenth month running, a survey out today has revealed.

The latest Ulster Bank purchasing managers index (PMI) signalled further reductions in output and new orders during December, albeit at a softer rate than in previous months.

Produced by IHS Markit, the survey is considered a reliable indicator on the latest trends within the north's economy.

The first PMI since the general election, the outcome pointed to more certainty for businesses around Brexit following the decisive majority won by Boris Johnston’s Conservative party.

It indicated that companies increased their staffing levels for the first time in a year during December, while confidence regarding the 12-month outlook for activity improved.

In respect of prices, the rate of input cost inflation softened again and companies lowered their output prices for the first time in over four years.

Ulster Bank’s chief economist Richard Ramsey said the north’s private sector ended the year much in the same manner as it began.

He said that like 2010, last year had been a year of decline and underperformance, albeit not as stark as the last deep recession.

“Local firms posted the fastest rates of contraction in output and orders of all the UK regions. 2019 was also the weakest year for private sector output, orders and employment growth in seven years.

“Meanwhile, export orders shrank at their fastest pace since 2011. Manufacturing and services firms posted their first annual fall in output since 2012.

“However, the pace of decline was more marked for both construction and retailers with the latter seeing sales slump to a nine-year low.”

The Ulster Bank PMI revealed that while firms continued to report sharp rates of decline in output and orders in December and during the fourth quarter, there were some signs that the north’s downturn is easing.

Although Brexit uncertainty dogged private sector performance for much of 2019, there was a notable pick-up in sentiment in the final three months.

“Greater clarity around Brexit and political direction following the General Election is a factor,” said Mr Ramsey.

“All sectors have become more optimistic about the year ahead with retailers the only sector not anticipating growth over the next twelve months.

“Significantly, construction firms expect activity to increase over the next year for the first time in 18 months.

“December also revealed that staffing levels rose for the first time in 12 months. Though one indicator worth watching in the year ahead is profitability. Firms have reduced the prices of their goods and services for the first time since October 2015. This will squeeze profitability and put pressure on headcount if demand doesn't pick up.”

Although welcoming the green shoots of change, the chief economist stressed that significant challenges remain, with the economy entering into 2020 in a weakened state.

“The lack of a Stormont Executive has been compounding matters, with its absence recently creeping into a fourth year,” said Mr Ramsey.

“Restoring the institutions has been a political imperative but it is also essential for the economy and for the delivery of public services.

“Brexit uncertainty has eased and the extreme pessimism has receded. But uncertainty and potentially adverse consequences on this front remain."