Sterling a threat and a hope amid sharpest rise in activity in 2017

Manufacturing rebounded in Augest from recent lows says the report
Manufacturing rebounded in Augest from recent lows says the report

The weakness in the pound continued to play a key role in business activity in August as greater rises in output and new orders helped support job creation according to new data from the Ulster Bank PMI report.

The report, produced for Ulster Bank by IHS Markit, suggests businesses enjoyed a positive month but warns again of rising inflationary pressures.

“In August, Northern Ireland firms reported faster rates of growth in business activity than the UK average for the first time this year,” said Richard Ramsey,chief economist for Northern Ireland with Ulster Bank.

“Whilst Northern Ireland saw an eight-month high in the rate of business growth, UK firms posted the slowest rate of expansion in six months.”

“It would appear that Northern Ireland is benefiting from the robust recovery in the Eurozone.

“Indeed, the latter is currently growing at twice the rate of the UK. Northern Ireland firms are taking advantage of having one of the fastest growing economies in Europe - the Republic of Ireland - on its doorstep.

“Throw a weak currency into the mix and the conditions are ideal for local firms selling into the Republic of Ireland / Eurozone market.”

Though all sectors saw their rates of business activity rise in August, Mr Ramsey said services had been the “stand-out performer”.

Its output and employment hit 17-month and 41-month highs respectively and although activity in the construction sector grew, it was only marginal.

“Meanwhile manufacturing and retail both rebounded from their recent lows, with sterling’s weakness acting as a tailwind in both sectors, for now.

“A major challenge remains inflation. Indeed, construction saw the fastest rise in input cost inflation in eight months. Firms appear to be passing their rising costs onto their customers with the price of goods and services rising across all sectors.

“Looking ahead, the robust rates of growth in new orders across most sectors bodes well for activity in coming months. However, inflationary pressures will act as a break on consumer spending in the domestic market. And longer-term economic prospects are clouded political uncertainty on a number of levels.”