DUBLIN: Northern Ireland’s manufacturers have been urged to seize on export opportunities as the weak pound increases the potential for overseas orders. The CBI Industrial Trends Survey said export orders have reached their highest since August 2014, hitting minus 6 this month, up from minus 22 in July.
It comes after the most recent Ulster Bank purchasing managers’ index for last month showed an increase in export orders, with the weakness of sterling helping Northern Ireland companies pick up new work from clients in the Republic of Ireland.
But Stephen Kelly, chief executive of Manufacturing NI, said there was a downside. “Whilst those who are exporting have received a boost due to sterling’s devaluation, there is equal pressure on input costs,” he said.
“Indeed, as we import more than we export, this is causing pressure on margins as local and Great Britain retailers, consumers and customers are unprepared to offer or endure higher prices due to wider concerns in the economy. “Our message to manufacturers is to look at exporting, particularly to markets on our doorstep, as an opportunity currently exists.”
According to the CBI’s survey yesterday, orders came in above expectations, dropping to minus 5 in August, down from minus 4 in July, but above economists’ predictions of a fall of minus 10. The report said the slide in sterling appeared to be fuelling stronger overseas demand, with chemical manufacturers accounting for more than half of the rise in orders.
However, it added price expectations for three months ahead rose to its highest level since February 2015, triggered in part by the rising cost of raw material following the fall in the pound. Anna Leach, CBI head of economic analysis and surveys, said the currency’s weakness was proving a “double-edged sword”, helping exports but pushing up costs and prices.
She added: “The most significant effects of the vote to leave the EU will flow over the medium to long-term. Therefore, firms need to see ambitious decisions in the (Chancellor’s) Autumn Statement that will secure the UK’s economic future as changes to trade, regulation and access to skills loom on the horizon.”
The survey of 505 firms found that average price increases in the three months to November hit plus 8 in August, up from plus 5 in July. It revealed that manufacturers producing coke and petroleum had the highest expectation of output price inflation for the next three months, while printers and publishers are expecting prices to fall the most.
It added that the measure of output expectations for the three months ahead was plus 11 in August, rising from plus 6 the month before. Samuel Tombs, chief UK economist at Pantheon Macroeconomics, urged caution over the data, but said it suggested that rising export orders were helping to “cushion the blow” from a slump in UK demand.
The UK manufacturing industry continued to decline in June, falling by 0.3%, but stepping up from a 0.6% contraction in May, according to the Office for National Statistics. And the UK-wide PMI survey for July showed the manufacturing sector slumped to its lowest level in more than three years, putting pressure on UK economic growth.
Howard Archer, chief UK and European economist for IHS Markit, said the CBI survey provided hope that UK GDP product would continue to grow in the third quarter. “Hopes have been lifted by robust retail sales in July and the CBI survey suggests that manufacturing output could hold up better than had been feared,” he said.
“Nevertheless, there are some serious dangers lurking for the manufacturing sector following the Brexit vote. “Much could depend on how much the boost to foreign orders from the substantially weakened pound counters likely increasingly-pressurised domestic demand for capital goods and big ticket consumer items.”
