Ulster Bank PMI: Northern Ireland economy continues to grow but pace wanes

Northern Ireland’s business continue to create jobs at an impressive rate but the economy’s recent stellar growth is beginning to wane.

Those are the findings from the latest Purchasing Managers’ Index (PMI) report from Ulster Bank which showed the private sectors bounce back from the pandemic is losing momentum.

Its business activity index dropped to 52.1 in August from 54.1. Any reading over 50 shows a rise in output with last month’s increase the “softest in the latest sequence”.

The PMI takes the temperature of firms across Northern Ireland and found that output in manufacturing and services expanded while falling in construction and retail.

“Most of the UK regions saw business activity grow at a slower rate in August, and Northern Ireland was no exception,” Richard Ramsey, Chief Economist of Ulster Bank in Northern Ireland, said. “Last month marked local firms’ slowest rates of growth in output, orders and employment in five months. But a two-speed recovery was on show in August at a sector level.

“Manufacturing and services firms saw some loss of momentum in August but still chalked up reasonable rates of growth in output and orders while staffing levels continued to rise at a solid pace. But retailers joined construction in contraction territory, with falling sales and orders. Hiring within retail though continued last month.”

The boost to the pique in activity in the services sector was put down to the further loosening of restrictions put in place during the Covid-19 pandemic.

Meanwhile, employment continued to rise at a solid pace as companies expanded workforce numbers in line with higher new orders.

However, backlogs of work continued to accumulate amid reports of staff shortages and supply-chain issues – suppliers’ delivery times lengthened markedly again.

“Elsewhere, the survey revealed again an all-too familiar story, with inflationary pressures and lengthening supplier delivery times. Within the UK, Northern Ireland continues to report the steepest rises in input costs, with local firms raising the prices of their goods and services at faster rates than any other region.

“Price pressures linked to raw materials, fuel, freight, wages and Brexit continued to be cited by survey respondents. Inflationary price pressures in August eased only marginally relative to their recent record highs, although services firms raised their prices at the fastest pace in 13 years.

Looking ahead, there are a number of challenges for businesses to overcome, Mr Ramsey said.

“In the meantime, firms will continue to grapple with inflationary challenges, supply chain disruption, skills shortages and adapting to Brexit. But as we saw last week, increased taxation in 2022 will further add to businesses’ mounting cost burden.”

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