Economy: Pace of decline eased during May, but Northern Ireland's private sector remains in deep downturn
THE north’s economy may have hit the bottom during April, but remains in deep downturn, new analysis of the private sector in May suggests.
The latest Purchasing Managers' Index (PMI) from Ulster Bank showed rates of contraction eased from the record lows of April. But business activity was still recorded at the second-lowest level since the survey began in August 2002.
The report, produced by IHS Markit is based on the responses of 200 private companies across the manufacturing, construction, retail and services sectors. It’s considered a reliable indicator on the direction of the north's economy.
New orders continued to decline at a severe pace in May, but the pace was slower than in April, with businesses slowly beginning to reopen during May.
Substantial contractions were also seen in new orders and new export business.
Ulster Bank’s chief economist Richard Ramsey said while the private sector reported some easing from the record declines in output, orders and employment during April, he said the improvements were only modest and weaker than anticipated.
“Indeed, firms reported their second lowest readings on record for business activity and new orders. And once again, Northern Ireland recorded the fastest rates of decline in output of the 12 UK regions.”
While the rate of job losses in Northern Ireland was better than most UK regions, it was still on par with the worst months of the global financial crisis.
Mr Ramsey said the UK Government’s furlough scheme had clearly prevented widespread redundancies.
But with the deadline for the scheme on Wednesday, trade bodies including Manufacturing NI are warning of a spike in redundancies.
Thompson Aero Seating announced 500 jobs will go within its operation on Thursday, while Bombardier and Charles Hurst are also reportedly mulling staffing levels.
All four sectors analysed by the PMI reported severe reductions in output and orders. Manufacturing and retail posted better results than the services and construction sectors.
Mr Ramsey said some 15 per cent of manufacturing firms reported a rise in output in May relative to the previous month, but the firms were outnumbered more than four-to-one by those indicating a decline in activity.
“Services firms are faring less well than manufacturing, with just one in 20 reporting an increase in activity in May,” he said.
“Meanwhile almost three-quarters of firms within the services industry reported a fall in activity last month, down from 90 per cent in April.”
The survey also revealed that when it comes to looking ahead over the next 12 months, Northern Ireland is the most pessimistic region of the UK.
While the other 11 UK regions all expect business activity to be higher in 12 months’ time, local firms – across all sectors – are expecting output to be significantly lower than it is today.
“This is likely to be influenced by the fact that coronavirus containment measures here are being unwound at a slower rate here than in the UK,” said Mr Ramsey.
“Combined with our higher dependence on retail and hospitality sectors, and the fact that, coronavirus aside, there is much uncertainty about a potential no-deal Brexit.”