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Northern Ireland private sector contracts for first time in 14 months

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Richard Ramsey

Richard Ramsey

Richard Ramsey

Northern Ireland’s private sector has contracted for the first time in 14 months, according to one new survey.

And the region was one of three areas in the UK to see a small fall in business activity during May, according to the latest Ulster Bank purchasing managers’ index.

Looking at future growth over the next 12 months, Northern Ireland was also the only place to predict a fall.

In May there was a fall in output and new orders during as steep inflationary pressures impacted demand.

“The impact of price pressures also hit business expectations, which turned negative,” it says. “On a more positive note, employment continued to rise.”

Input costs unsurprisingly continue to soar, rising at a record pace for the second month running.

Overall, activity declined in the construction and retail sectors, while softer expansions were seen in manufacturing and services.

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“New orders fell at a solid pace, and one that was the sharpest since February 2021,” it says. “Respondents indicated that inflationary pressures had hit demand.”

Richard Ramsey, chief economist Northern Ireland, Ulster Bank, says the latest survey of Northern Ireland’s private sector “saw the deterioration in business conditions accelerate in May”.

“Local firms reported a fall in business activity for the first time in 14 months with the significant declines in retail and construction outweighing continued growth within the manufacturing and services sectors. Inflationary pressures and heightened uncertainty are hitting demand and delaying investment.

“Input cost inflation in May fell just shy of October’s record rate but local firms increased their prices at the fastest pace in the survey’s history. The cost-of-living crisis is making its presence felt, particularly on retail, with both sales and new orders slumping in May. Construction remains mired in an order book recession with last month’s steep decline marking the eleventh successive month of contraction.

“The overall outlook is for things to get worse, with new orders falling at their fastest pace since February last year. Northern Ireland firms’ order books contracted at the fastest rate amongst the 12 UK regions. Manufacturing, services, construction and retail all contributed to the drop in incoming business.

“Despite the advantages afforded to local firms through the NI Protocol, Northern Ireland firms remain the least optimistic of any UK region regarding sales/activity in 12 months’ time. Local firms expect sales and activity to fall in a year’s time with this negativity driven by retail. Manufacturing is the only sector projecting meaningful growth in 12 months’ time.

“The picture regarding employment is much more robust. It is the one bright spot in the survey, with continued growth in firms’ staffing levels reported for the 15th month in succession. But skills shortages remain a problem, from both a capacity and wage pressure perspective. It remains to be seen how a slowdown in the economy will improve this, providing one potentially silver lining to the downturn cloud.”
 


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