Easing of lockdown in July saw NI business activity back in growth territory for first time in 17 months
THE easing of lockdown restrictions helped the north’s private sector return to growth for the first time in 17 months during July, but job losses continue to mount.
The latest Purchasing Managers' Index (PMI) from Ulster Bank found business activity in Northern Ireland in growth territory for the first time since February 2019.
The monthly analysis, produced by IHS Markit, takes a snapshot of the economy based on the feedback from 200 private companies.
It pointed to increased activity across the manufacturing, construction and retail sectors, amid signs of recovery following sharp falls in the early days of the Covid-19 pandemic. But activity continued to decline at service providers.
The survey indicated that new orders returned to growth, but employment continued to decline with firms required to lower selling prices to secure new work.
Ulster Bank’s chief economist Richard Ramsey explains the PMI analysis
Ulster Bank’s chief economist Richard Ramsey said the easing of restrictions linked to Covid-19 during July resulted in the fastest rate of growth in two years.
But he said the data merely reflected the rebound from abnormally low levels.
Retail reported the fastest rate of growth in sales, while manufacturing and construction saw activity expand at its fastest pace in almost six years.
“Perhaps surprisingly, the services sector continued to contract at a significant rate,” said the economist.
“While over one-third of services firms saw a month-on-month rise in activity in July, an even greater number (40 per cent) reported a fall.
“Clearly some firms have benefited from the reopening of the economy. However, others are finding that their recently completed work is not being replaced by new business at a sufficient rate.”
Mr Ramsey said while demand improved in July, the pressure on profit margins continued to intensify.
“Local firms have reduced their prices for the fourth time in five months in order to secure new work,” he said.
“This is despite the significant rise in input costs, notably Covid-19 related expenditure such as personal protective equipment (PPE).
“Despite a pick-up in demand, Northern Ireland along with all the other UK regions continued to reduce their staffing levels at a rapid rate.
“Although the pace of job losses amongst local firms was less marked than elsewhere. The phasing out of the furlough scheme is anticipated to lead to further redundancies in the months ahead.”
The economist said while the return to growth is welcome news, it merely marks the start of a long road to recovery.
“There remains a huge gap relative to pre-pandemic levels of output/activity. Bridging this gap will take years not months. And the twin challenges of Covid-19 and Brexit will have to be navigated along the way."