PMI: inflationary pressures intensify for the Northern Irish private sector
Inflationary pressures for northern businesses are mounting, with energy spikes and supply issues expected to compound problems this winter.
That’s according to the latest Ulster Bank Purchasing Managers Index (PMI).
Regarded as one of the most reliable early indicators of the direction of the Northern Ireland economy, the September business survey found that the slight easing in inflation reported in August was turned out to be the exception to the recent trend.
The PMI showed that input prices for the private sector re-accelerated at the highest rate since the start of the monthly survey in 2002.
Compiled by IHS Markit for Ulster Bank, the report is based on the experiences of 200 private companies in the manufacturing, construction, retail and service sectors of the north.
The survey showed that selling prices among businesses also hit a new high last month, with businesses continuing to pass on their sharply rising costs.
Ulster Bank chief economist Richard Ramsey said the situation is likely to get worse before it gets better, with the latest survey coming before the most recent energy price shock the economy is facing .
He cited price inflation as one of the top three issues facing the northern economy this winter, alongside falling new orders and supply chain issues.
According to the September survey, private sector companies reported the first drop in new orders in six months.
“Third,” continues the economist: “Supply chains remain under strain, with supplier delivery times stretching considerably in September compared to August.
“This is particularly acute in retail, and it will present challenges for consumers and businesses, especially as Christmas approaches. “
The last PMI showed that while commercial activity continued to grow in September, the situation was more and more mixed by sector.
Manufacturing was the strongest performer last month, with employment growing at the second-fastest rate on record for the industry.
The northern service sector also saw a strong increase in activity.
But both retail trade and construction suffered a drop in new orders and employment, with retail trade particularly hard hit.
Mr Ramsey said the construction and retail sectors remain pessimistic about production for the coming year.
Despite pricing issues and potential issues around supply chains, Northern Ireland’s private sector as a whole appeared on a more positive basis last month, with business confidence peaking in three months.
The PMI noted that optimism seemed primarily driven by hopes of improved business volumes as Covid-19 restrictions are further relaxed.