Pubs, restaurants and shops are reporting steep rises in costs, and are passing those on with record increases in prices to customers, according to the latest business survey published by Ulster Bank.
Inflation and disruption to the supply chain, largely caused by Brexit, have hit construction firms, retailers and the hospitality industry hardest , but all sectors were affected, the survey conducted by IHS Markit on behalf of the bank found.
Both inflation and disruption to the supply chain are expected to continue to feature through the remainder of the year and into 2022, Ulster Bank chief economist Richard Ramsey has warned.
But the report also notes that private sector growth and employment rose at the fastest rate in seven years over the second quarter to the end of June.
The hospitality industry in June reported the fastest growth in business in seven years as pubs, restaurants and hotels opened up following the easing of restrictions.
Companies across all sectors have revealed strong increases in sales and new orders for the month, according to Purchasing Managers' Index (PMI) survey.
“Northern Ireland has witnessed its best quarter for private sector growth — both in terms of output and orders — since Q3 2014 and the fastest rate of employment growth since Q2 2014," Mr Ramsey said. "However, it was also the worst quarter for inflationary pressures in the PMI survey’s history."
While firms revealed strong rates of growth and employment over the month, it was slightly down from May.
"Services firms reported their fastest rate of growth in business activity… in over seven years," the economist said. "This was not unexpected given that June was the first full month that the hospitality sector has been open since lockdown restrictions were eased."
Robust rates of growth are likely to continue as companies are reporting near capacity order books, which also grew at the fastest rate in seven years. This is led by the services sector, while construction had its first rise in orders in seven months.
Rising demand coupled with ongoing supply chain disruption led firms to increase their backlogs of work at the fastest pace in the survey’s 19-year history, the survey found.
"Suppliers’ delivery times lengthened significantly in June with Brexit invariably cited for these delays," Mr Ramsey said.
Inflation is a major issue for many firms, with costs, including raw materials, wages and shipping, rising at a record rate, the report found.
"Firms in the construction industry posted the steepest rates of input cost inflation," Mr Ramsey said.
"Businesses are passing these increased costs onto their customers at record rates. Once again, construction firms, followed by retailers, are posting the steepest price hikes.
"It is expected that supply chain disruption and significant inflationary pressures will be a feature of the business environment for the rest of the year and well into 2022.”
Higher prices for raw materials, increased shipping charges due to Brexit and global supply issues, and rising wages all added to input costs during the month, the survey found.