High costs continue to damage local firms

“In September 2017:

• the headline all-sector business activity indicator was +7 percentage points (pp); this means the proportion of businesses reporting an increase was 7 pp greater than those reporting a decrease;

• the business activity indicator was significantly lower than three months ago, when it was +25 pp;

• six out of the eight current indicators were positive; only profitability and input costs were negative;

• the product prices and business optimism indicators were both positive, but both were slightly lower than last quarter;

• three indicators changed by more than 10 pp; the business activity indicator decreased 18 pp to a slightly positive +7 pp, and new business decreased from +23 pp to +12 pp, whereas the input costs indicator was less negative, rising from -55 pp to -39 pp;

• the profitability indicator was positive for the finance sector, indicating more companies reported increases in profits than decreases, while it was negative for other sectors;

• 44% of companies reported higher input costs, producing a strongly negative indicator of -39 pp; this was more acute for the non-finance sector, where over half (57%) of businesses reported higher costs;

• the wholesale and retail sector had indicators of -57 pp for input costs and +51 pp for product prices, indicating that the sector has broadly started passing on its higher costs to consumers;

• the finance sector was more positive than the non-finance sector; five of the eight indicators relating to the current situation were more positive for the finance sector, two of them by over 20 pp;

• the all-sector future business activity indicator was positive, with the finance sector being strongly positive about future business and the non-finance sector being neutral;

• the outlook for future employment was positive overall, driven by the strongly positive finance sector, while the non-finance sector was neutral.”