Weak pound helps boost export orders in Northern Ireland

Exports orders in Northern Ireland increased at record levels last month, according to the latest figures.

The boost, attributed to a drop in the value of sterling, is among a number of positive business results in the latest Ulster Bank Northern Ireland PMI report.

Richard Ramsey, chief economist with Ulster Bank Northern Ireland, said: "Export orders increased at a record rate in November with the pace of expansion eclipsing the previous high by a considerable margin.

"Sterling's marked depreciation has boosted the price competitiveness of manufactured products in export markets.

"Manufacturing output and new orders hit 25-month and 17-month highs respectively."

The favourable exchange rate has also been responsible for a surge in cross-border shopping, sending retail sales and orders to almost two-and-a-half-year highs.

Meanwhile, the report also found a solid monthly expansion in business activity - with retail showing the strongest growth followed by the manufacturing and services sectors.

On the other hand, construction activity continued to fall.

New orders rose sharply, ending a four-month sequence of decline and there was a record rise in new business from abroad.

Backlogs of work also increased for the first time in seven months amid the sharp rise in new business.

Employment rose for the twenty-second successive month, although the rate of job creation was marginal and the slowest since June 2015.

The rate of input cost inflation quickened to the fastest since May 2011 in November, with panellists indicating that the latest rise was principally due to sterling weakness.

Mr Ramsey said: "The first three quarters of 2016 saw a deceleration in growth in Northern Ireland's private sector. However, following stagnation in the third quarter, the final three months of the year are shaping up to be much better.

"Indeed, business activity accelerated further in November, with the rate of expansion representing an eight-month-high.

"Meanwhile, new orders returned to growth for the first time in five months with local firms' order books expanding at their fastest rate since September 2014. This suggests the economy has regained some momentum going into 2017.

"Overall, whilst the latest survey of business conditions is positive at a headline level, it is something of a mixed bag within. The positives include export orders and the strong performance of the retail and manufacturing sectors.

"Meanwhile, the challenges include inflation, the slowdown in employment growth and the under-performance of the services and construction industries.

"Despite their strong sales performance, retailers and manufacturers are not without their challenges. Chief amongst these is inflation.

The downside of a weak currency is import price inflation. Northern Ireland's manufacturing firms have recently seen their input cost inflation hit a 99-month high.

"As a result, manufacturers increased the price of their goods at the fastest rate on record.

"Retailers are also experiencing the highest rate of cost inflation in over eight years. Consumers should therefore brace themselves for significant price rises in 2017.

"Besides inflation, another concern is the slowdown in the rate of employment growth. Last month, Northern Ireland firms raised their staffing levels at the weakest rate since June 2015 with manufacturing and construction firms reporting job losses.

"Meanwhile, the subdued performance of the services sector and ongoing contraction within the construction sector are worrying.

"The construction sector's fortunes conceal reasonable activity in Northern Ireland but a fall-off in demand in their dominant market, GB. Both these sectors are under-performing relative to their long-term growth rates.

"Whilst it is positive that the Northern Ireland private sector appears to approaching the end of 2016 in growth mode, the imbalance in that growth, being retail-driven, is somewhat concerning.

"This and the prevalence of inflation will be amongst the key 'watch-outs' in 2017."