BUSINESS conditions in the north have dipped for first time in six months, according to Ulster Bank's latest closely-watched PMI report.
It pointed to a renewed decline in business activity as demand continued to falter, though firms still continued to increase their staffing levels.
The findings come as there was a further softening of inflationary pressures at the start of the third quarter.
The deterioration was broad-based, with three of the four sectors monitored by the PMI (retail, construction and manufacturing) all contracting.
The exception was services sector, where activity just about managed to hold up in July, albeit flatlining.
The pace of decline the most marked in the construction and retail sectors, and the fall-off in new demand was most notable within export markets.
"Just like the summer weather, business conditions took a turn for the worse in July,"
Ulster Bank chief economist Richard Ramsey said.
"Following a notable softening in new orders during the second quarter, local businesses started the third quarter with activity falling for the first time in six months."
And he warned: "The near-term outlook is for a further softening in demand, with new orders declining for the second month running."
Mr Ramsey said that while price pressures have hit demand in recent months, it was "encouraging" to note that inflationary pressures continue to moderate.
"Input cost inflation eased to a 38-month low, with manufacturers recording their sharpest fall in their input prices since the survey began," he said.
"This has led manufacturers to lower the price of their goods for the second month running.
"Inflationary pressures remain more stubborn within the construction and service industries.
Both these sectors, unlike retail and manufacturing, reported input cost and selling price inflation well above the average rates pre-pandemic.
"Firms reliant on imports from abroad will be pleased to see the ongoing improvement in global supply chains."
The survey showed that despite a notable softening in demand, firms continued to increase their staffing levels, with all four sectors boosting their head counts in July, albeit at a slower pace than June.
But while business conditions may have taken a turn for the worse in July, sentiment for the year ahead among firms in the north has actually picked up.
Mr Ramsey says: "The interest rate outlook has improved slightly, but the dark cloud of no Stormont Executive looks set to remain anchored over the economy for the foreseeable future.
"Only time will tell if the new rise in optimism is well founded or misplaced."
