Slipping consumer confidence, the new Covid variant and rising inflation led to a decline in new orders and a fractional increase in overall business activity, a report has said.
The findings are detailed in the latest monthly survey of purchasing managers.
It also noted a solid rise in employment in December and firms are optimistic for 2022, with the expectation of a possible end to the stop-start environment produced by the pandemic, most recently the staff shortages resulting from the Omicron-driven case surge.
The data from the Ulster Bank Northern Ireland Purchasing Managers’ Index (PMI), produced by IHS Markit, includes a marker measuring business activity, with 50 points revealing no increase. According to the index, Northern Ireland reported a figure of 50.2, the weakest of the 11 regions of the UK out of 12 that reported growth last month.
“No rapid improvement is anticipated anytime soon with new orders declining for the fourth month running and export orders contracting sharply, extending the current sequence of decline to 35 months,” Richard Ramsey, chief economist with the Ulster Bank, said.
“Inflationary pressures remain severe, while suppliers’ delivery times continue to lengthen sharply. Despite these near-term challenges, local firms notched-up their 10th successive month of employment growth with all four sectors increasing their headcount.”
The business activity index dropped to 50.2 in December from 52.9 the previous month. That was the slowest growth in activity since the first recorded growth in this cycle nine months ago.
Services activity decreased for the first time since March, while construction was also down. Manufacturing and retail grew.
Material shortages and reduced consumer confidence were behind the slowdown in output growth, or goods produced, while they also led to reduced new orders for the fourth month in a row.
Supply shortages remained a feature of the latest survey, with delivery times lengthening markedly and backlogs of work rising despite the drop in new orders, according to the report’s authors.
“Rates of inflation also remained elevated, despite softening from November. Higher costs were reported for a range of inputs including energy, freight, fuel, raw materials and wages,” the report added.
Mr Ramsey added all sectors bar construction should see rises in output by the end of this year.