Growth in the economy slowed down during April as inflation pushed businesses to raise their prices at the fastest rate in two decades, according to a report today,
The Ulster Bank purchasing managers’ index (PMI) found soaring inflation was hitting output and new orders, while the pace of job creation was also slowing.
And inflationary pressures were affecting Northern Ireland firms more than those around the UK, according to Ulster Bank chief economist Richard Ramsey.
Energy costs were causing the biggest problems, and output prices were going up fastest in manufacturing and retail.
Mr Ramsey said: “Lockdowns across China and the war in Ukraine, caused economic forecasts to be slashed around the world last month.
“Slower rates of growth and higher rates of inflation are par for the course across the PMI surveys in April too.
“Northern Ireland was no exception with firms reporting slower rates of growth in output, new orders and employment.
“Conversely, input costs rose at their second highest rate on record while firms raised the prices of their goods and services at the fastest pace since the survey began almost 20 years ago.
“Indeed, inflationary pressures continue to be more intense in Northern Ireland than in all other UK regions.”
Although the manufacturing sector was on the up, the rate of growth in output and new orders had slowed substantially.
And the rate of hiring new people for manufacturing jobs fell to a 14-month low as the struggle to find staff intensified.
However, the services sector — which includes businesses like estate agents and law firms — did report faster rates of growth in new orders and employment.
But the news wasn’t as good for construction, with firms suffering a fall in output and a steep drop in incoming orders.
There were deep-rooted problems, Mr Ramsey said — even in the services sector.
“Manufacturing and services are running into capacity constraints. Skills shortages, coupled with strong demand have resulted in backlogs mounting at rapid rates.
“Services firms are seeing outstanding workloads rise at their fastest paces since 2013.
“Lengthening supplier delivery times are adding to these difficulties.”
He said such backlogs would keep growth strong in the sector. However, the cost-of-living crisis was bearing down on retailers, who were the least optimistic of all retailers about the year ahead.
The challenges would leave business more in need than ever of help from a new Executive following Thursday’s election, Mr Ramsey said.
“With the economy set to deteriorate in the second half of the year, the business community will be hoping for a quick formation of a Northern Ireland Executive to help deal with short term challenges and to progress much needed long-term reforms and investment.”
Business activity rose at its softest rate since January during last month, the PMI said. But the rising cost of living was hitting demand.
And the construction industry was being hit by shortages of materials and staff.
Backlogs of work were going up but on the flip side, delays to supplier deliveries remained common.
However, business confidence had picked up on March levels, although it was still fairly subdued thanks to concerns about rising costs, the PMI found.