BUSINESS activity in the province continued to fall as 2012 ended but at a slightly slower rate than during much of the year.
The latest data from the Ulster Bank Northern Ireland PMI report published this morning indicates that the Northern Ireland private sector remained in contraction during December, and continued to underperform relative to the UK as a whole.
The headline seasonally adjusted Business Activity Index reached 44.8, up from 41.6 in November but there were further marked reductions in activity and new orders, despite companies offering discounts to clients.
The report says lower workloads and attempts to reduce costs led to a further decline in employment, albeit at a slower pace.
“In many respects Northern Ireland’s economy ended 2012 the way it began, with some positives evident but remaining in short supply,” said Richard Ramsey, chief economist in Northern Ireland for the Ulster Bank.
Noting that 2012 has been a poorer year for growth than 2011, he said the prospect of the economy escaping recession was “50:50”.
“Any growth or further contraction is expected to be marginal, within the range -0.5% to +0.5%. The economy will continue ‘to bump along the bottom’ during the year, neither getting significantly better or worse. However, a significant minority of firms are expected to grow their businesses and avail of opportunities in the year ahead.”
While some of those firms continued to report growth in output, exports, and employment in December, he said those firms still remained in the minority.
Moreover, he said firms reported a faster rate of decline in both output and new orders in December relative to the start of 2012.
“That said, most of the indicators in the December PMI survey improved relative to the previous month’s report,” he said.
“The biggest improvement was the significant easing in the pace of decline of export orders. In addition, employment fell by its weakest rate since April 2012. Manufacturing is bucking the wider trend with employment levels rising in December for the third time in five months.”
One area which did not show an improvement amongst local firms was in terms of costs and prices.
“Input cost inflation accelerated marginally in December. Meanwhile, intense competition has contributed to a further erosion of pricing power as local firms report further reductions in prices/fees for their goods and services. Profitability and lack of demand remain key challenges in 2013 particularly for construction and service sector firms. It is noted that 2012 witnessed the steepest annual decline in services activity since the PMI survey began. Within this though, some firms performed well due to Northern Ireland’s growth in visitor numbers.”
Looking at the year as a whole, Mr Ramsey said 2012 had seen private sector output, new orders and employment fall at a faster rate relative to 2011.
“It is noted that the official economic growth figures for 2011, released last month, signalled a 0.2 per cent annual contraction in Northern Ireland’s overall economy. Therefore we anticipate a steeper contraction to be revealed for 2012 in due course.”