June heatwave boosts Northern Ireland economy, but rising prices still a concern
Businesses in Northern Ireland appear to be reaping the rewards of the hottest June in 170 years, according to a new report from Ulster Bank.
The latest purchasing managers index (PMI) survey signalled that the private sector ended the second quarter of 2018 on a positive note, with sharper rises in output and new orders recorded.
However, the bank said there were further signs of increasing inflationary pressures, with businesses raising the cost of goods and services at their fastest rate in a decade.
The survey also suggested that confidence among the business community had dipped to its lowest point in almost a year.
After the economy was hit by the 'Beast from the East', Ulster Bank's chief economist Richard Ramsey said the hottest June in 170 years seemed to have provided an antidote.
Some respondents attributed the increase in demand to the good weather - particularly those in consumer-sensitive sectors like retail and services - but it was not the sole factor.
"Overall business activity and new orders rose at their fastest rates in four months during June, with export orders growth remaining particularly strong, driven by demand from customers in the Republic of Ireland," Mr Ramsay said.
"Meanwhile, firms increased staff numbers for the 41st consecutive month, albeit at a slightly slower rate than in May."
Manufacturing has been the main beneficiary of the growth in exports, with output growth accelerating to a 44-month high in June.
Construction output also accelerated sharply to a 45-month high, with the good weather a factor.
Mr Ramsay said: "Construction order books filled up at their fastest rate in 28 months, which bodes well for construction activity in the short-term.
"However, in the longer-term, construction firms are concerned that the pipeline of work will begin to dry up in the absence of decision-making in government around capital investment."
The survey yielded weaker results for the services and retail sectors. Mr Ramsay said: "Services saw new orders growth ease, while retail remains the weakest of all sectors concerning orders."
He said inflation was continuing to have a negative impact on all sectors in the Northern Ireland economy, with prices rising fast. Input cost inflation had intensified, driven by higher wages, fuel cost increases and raw material price rises.
"Firms are passing these higher costs on to customers, meaning they are raising the prices of their goods and services at the fastest rate in a decade," he said.
"Inflationary pressures are rising faster in Northern Ireland than elsewhere in the UK, and linked to this, firms here are less optimistic than businesses in any other UK region."
Mr Ramsay added issues such as Brexit and the Stormont power vacuum continue to have an impact on confidence.
"These issues, alongside skills shortages, will remain prevalent into the months ahead," he said.