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Business activity hit by falling demand

Northern Ireland's business activity dropped again last month, but at the slowest rate since May, according to Ulster Bank's latest report from company managers.

The bank said the lower pace of decline in its purchasing managers' index (PMI) report has been driven by the manufacturing industry, the only sector which did not report a drop in output from the previous month.

The monthly survey, carried out by Markit, showed a lack of demand was behind the continued fall in private-sector activity, with declines most felt in construction and services.

Employee numbers fell for the 43rd consecutive month, but at the slowest rate since March 2008.

Cost pressures remained sharp but weaker than those seen in the first half of 2011. Higher raw material, fuel and energy prices were again cited as the biggest drivers of inflation.

Despite average costs going up, businesses reported a reduction in their own prices, reflecting strong competition for new business.

Ulster Bank's chief economist Richard Ramsey observed that UK PMIs had been more encouraging than those for the struggling eurozone.

Mr Ramsey said: "As for Northern Ireland, its private sector is patiently waiting for its first month of growth in almost four years.

"Once again, local firms reported a decline in output in September with Northern Ireland remaining the only UK region not posting growth.

"Manufacturing remains Northern Ireland's best performing sector (outside of agriculture) and was the only sector to record growth in both output and new business.

"Meanwhile the construction and service industries continue to contract at a significant rate."

Mr Ramsey acknowledged that the decrease in private-sector employment "compared favourably" with other UK regions.

However, he noted that more than a third of firms reported a drop in exports last month, and with the global outlook deteriorating, this figure was expected to rise.

He said pumping money into the economy through quantitative easing was a signal that times were tough. He added: "As Sir Mervyn King warned last week, the economic outlook appears more challenging now than it did last month, with the Bank of England responding accordingly." 43