Business activity in Northern Ireland fell at much slower rate in August, providing further cause for hope that the local economy will soon start to recover.

The Ulster Bank Purchasing Managers Index (PMI) survey showed that while output and new work fell for the 21st consecutive month in August, the rate of decline continued to ease.

Commenting on the findings, the bank’s economist Richard Ramsey said: “The latest PMI survey offers further encouragement that Northern Ireland’s private sector should return to positive growth before the end of the year.

“While the majority of firms are still experiencing decreasing levels of output, the latest survey indicates a significant rise in the number of companies reporting growth.

“More than one in four firms reported a rise in business activity in August, a figure not seen since October 2007. It is a similar story with new orders, with 30% of local companies signalling a rise in new incoming business. This represents the largest share in two years.”

Those who reported a decline in business linked it to reduced levels of new work and unfavourable trading conditions impacting on sales, but the overall pace of contraction eased to its slowest rate in 18 months.

Despite the improvement Northern Ireland is the only UK region still waiting to return to growth, with a big difference noted between the positive performance of the services sector in the UK and sharp fall in output in the same sector in the province.

Ulster companies’ pricing power also remained weak, with average charges falling sharply as firms competed to attract new business but input costs increasing at the most marked rate in four months due to higher raw material and fuel prices.

“On a positive note, the pace of job losses continues to ease, with local firms reporting a more moderate decline in employment levels relative to their UK counterparts for the third month in a row. Northern Ireland’s construction sector continues to bear the brunt of the ongoing job losses,” added Mr Ramsey.

The rate of job cuts was the weakest since April 2008, the report said.

sross@belfasttelegraph.co.uk