Better 2018 than expected for firms, but slowdown ‘may be approaching’

BUSINESS activity in Northern Ireland accelerated much faster than the UK average during November but there are signs of a slowdown in the economy, according to a report today.

The latest purchasing managers’ index (PMI) from Ulster Bank revealed signs of a slowdown in the economy, with Brexit uncertainty hitting demand from abroad.

Manufacturing remained the standout performer during the month, with production increas- ing at the sharpest pace since June, representing the 26th consecutive monthly rise in business activity here. The only category to record a decline in activity was the construction sector, which fell for the second month running in November.

But Ulster Bank chief economist Richard Ramsey said that when viewed against longer-term averages, the rate of overall expansion has been relatively subdued.

And against the backdrop of the ongoing political uncertainty here, business confidence remained relatively muted.

Reports published by NI Chamber and Manufacturing NI last week reflected growing concern among local businesses over Brexit.

The PMI report, produced for Ulster Bank by IHS Markit, said Brexit uncertainty was mentioned by businesses as a factor restricting demand from abroad. Although new export orders continued to increase, the rate of expansion eased for the sixth successive month.

Last week’s Manufacturing NI survey revealed that most firms within the industry rank Brexit as their biggest barrier. Some 16% of firms said they had already started to stockpile goods, while another 42% said they plan to do the same.

The Ulster Bank PMI reflected a faster rise in activity, but only a modest growth in new orders.

Mr Ramsey said the PMI showed that the private sector will have had a better 2018 than previously anticipated, but added: “While continuing growth in the private sector is encouraging, the reality is that the rate of expansion is relatively subdued compared to longer-term averages.

“Indeed, the final three months of the year are shaping up to have the weakest rate of growth in nine quarters.

“Meanwhile, export orders are set to have their weakest rate of growth in 10 quarters. Indeed, in November the pace of export order growth slowed to its weakest rate since the EU referendum.

“This slowdown is clearly having an impact on sentiment for the year ahead. The overall health of the UK economy is the most important driver of activity in the Northern Ireland private sector.

“This trend therefore does not bode well for 2019.”