Summer sunshine contributes to business boost for Northern Ireland says PMI report

The unusually long spell of warm weather has contributed to marked increases in both output and new orders for businesses in Northern Ireland in the last month according to Ulster Bank
Gary McDonald Business Editor

CURRENT business conditions in Northern Ireland are said to be 'very encouraging', a new snapshot of the local economy has shown.

The unusually long spell of warm weather and favourable exchange rates have contributed to marked increases in both output and new orders.

But there are fears that the feel-good factor won't last, because firms here are the least optimistic about business activity for the year ahead of all UK regions.

The findings are in Ulster Bank's monthly Purchasing Managers' Index (PMI) survey.

It also showed, however, that employment increased only slightly and business confidence eased. The rate of input cost inflation remained sharp, leading output prices to rise at a pace only slightly weaker than June's ten-year high.

Richard Ramsey, Ulster Bank's chief economist in the north, said: “Northern Ireland's private sector started the third quarter where it left off in June with output and new orders growth accelerating in July.

"This was the fourth month in a row that the pace of activity picked-up, with both these indicators hitting six-month highs.

"Northern Ireland's marked improvement last month contrasted with a notable slowdown in a number of English regions, which dragged the overall UK growth rate lower. Indeed, our local private sector recorded the fastest rate of growth of all the UK regions for both output and new orders."

He added: “The pick-up in business activity in July was broad-based with all sectors bar manufacturing reporting faster rates of output growth.

"Construction activity accelerated to a 46-month high with the upswing mirroring a marked improvement within the UK's construction industry. Once again, the good weather was cited as a factor supporting demand across a range of sectors. Manufacturing activity moderated from its recent highs with new orders slowing to a 21-month low.

“Local firms have been increasing their headcount for the last three-and-a-half years. However, the pace of job creation eased to a 12-month low in July due to reduced hiring within manufacturing and services. A number of firms report ongoing difficulties in recruiting suitable staff.

“Inflationary pressures also remain a key cause of concern amongst businesses. The north east of England knocked Northern Ireland off the UK top spot for input cost inflation in July.

"Northern Ireland firms though raised their prices at the fastest rate of all the UK regions and at their sharpest rate in a decade. With sterling depreciating further since the survey was conducted, we can expect inflationary pressures to continue to feature prominently as an issue in the coming months.

“Overall, current business conditions are very encouraging. The key question, however, is will it last?

"Significantly, Northern Ireland firms are the least optimistic about business activity for the year ahead of all the UK regions. The slide in local business confidence conceals contrasting performance within sectors.

"Services firms remain the most upbeat and resilient. But confidence within construction, retail and manufacturing firms hasn't been lower in the last 17 months. The local construction industry remains the least optimistic by quite some margin.

"Given the absence of decision-making around publicly-funded capital investment, coupled with recent legal challenges to procurement processes, the pessimism cited by local construction firms may be well placed.”

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