Business

NI economic output grows led by booming services sector

The services sector in Northern Ireland has led the region's economic growth

ECONOMIC output in Northern Ireland has continued to grow for the second quarter of the year, but business activity now sits at an eight-month low new figures show.

The June Purchasing Managers Index (PMI) report from Ulster Bank shows that the north's private sector economy enters the latter part of the year with some momentum, albeit there has been a recorded slowdown in retail, construction and manufacturing.

The Business Activity Index was down marginally in June to 53.2 from May's figure of 53.5, but solid monthly output growth was reported, with panellists stating that higher new work volumes was the principal factor driving the latest expansion.

New business also rose solidly, but at the slowest pace in the current eight-month sequence of expansion.

Some respondents reported having been able to secure new clients over the month, but others mentioned that uncertainty had dampened demand.

As has been the case in each month since February 2015, staffing levels increased, with firms linking the latest rise to higher activity requirements. The rate of job creation was modest, however, and the slowest since January.

Although input prices continued to rise sharply on the back of sterling weakness and higher staff costs, the rate of inflation eased for the second month running and was the slowest for a year.

The rate of output price inflation was little-changed, meanwhile, with charges continuing to rise markedly as companies passed on higher cost burdens to their clients.

Companies in Northern Ireland displayed optimism regarding the potential for output growth over the next 12 months, often reflecting business expansion plans. That said, sentiment was the lowest since March amid market uncertainty.

Ulster Bank economist Richard Ramsey said business activity exceeded expectations, with the services sector the "star performer" in the past quarter.

"In June, business activity continued to expand, but the rate of growth has been easing and currently sits at an eight-month low. This was due to a slowdown in retail, construction and manufacturing, with the services sector bucking the wider trend."

"On the positive side, employment and exports continue to rise, but the overall theme is one of easing, with these indicators expanding less robustly than in the previous month. Inflationary pressures are also easing from very high levels, however both input and output inflation remain elevated, which is a key concern for the second half of the year."

"Despite this, local firms remain positive about the outlook for the next 12 months. However, they are less positive than they have been, which reflects a number of factors including reduced consumer confidence, political instability, and ongoing negotiations around Brexit. None of these issues appears to be going away any time soon. Concerns around Northern Ireland’s public finances also remain; however they will have been eased somewhat by the recent funding package agreed with Westminster," he added.

 

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