Economy On Cusp of Returning To Growth

Firm in Northern Ireland are winning new business at a rate not seen since before the recession.

According to the Ulster Bank‘s latest purchasing managers’ index (PMI) new business in June returned to growth for the first time since November 2007.

The report produced by Markit showed that the north’s private sector experienced a broad stabilisation in activity while backlogs of work also returned to growth.

However, firms continued to lower their staffing levels.

Meanwhile, the rate of input cost inflation remained sharp but companies left their output prices unchanged.

Responding to the report, the Construction Employers Federation (CEF) said it showed the north’s construction industry had reached a “turning point”.

Ulster Bank’s chief economist in Northern Ireland Richard Ramsey said the report suggested the economy “remains on the cusp of a rebound in business activity, with only the service sector in decline at the end of the second quarter”.

New business increased over the month, ending a five-and-a-half year period of contraction with improving client confidence helping them to secure new contracts.

That in turn led to an increased work backlog marking the first rise in outstanding business since October 2007.

“Manufacturing production, construction output and retail sales all returned to growth in June, highlighting a broad-based improvement in business conditions in the month. Northern Ireland firms waved goodbye to a five-and-a-half year period of falling new orders in June, as stronger demand in the manufacturing and construction sectors saw overall levels of new work increase for the first time since late-2007,” Mr Ramsey said.

“Demand levels in key export markets appeared less of a drag on new business flows in June which helped the manufacturing sector achieve its strongest gains in order volumes since February.

“Meanwhile, there was a positive change of direction in new work for the domestic-focused construction sector perhaps helped by signs of stabilisation in the property market.

“The likelihood of an imminent return to output growth across the Northern Ireland economy has surely been boosted by the latest survey figures as rising levels of new work and an accumulation of backlogs in June should translate into upward pressure on production schedules during the second half of 2013.

“While the Northern Ireland economy is some way behind the rest of the UK in terms of achieving ‘escape velocity’, there is now at least tangible evidence that greater numbers of Northern Ireland firms are seeing significant improvements in their business environment.”

CEF managing director John Armstrong said the survey supported the federation’s “analysis that the construction industry in Northern Ireland may have reached a turning point”.

“Following a marked deceleration in the pace of decline in construction output last year, there has been a tentative wave of positivity in the industry in the first half of 2013,” he said.

“We are fairly confident that this improved performance is being driven by both the fantastic record of local companies in securing contracts in Great Britain and a more stable housing market in Northern Ireland.”