Signs the Northern Ireland economy may be picking up pace were erased in July as activity across much of the private sector contracted.
The latest PMI report from Ulster Bank showed a decline in activity for the first time in six months in July, with only the services sector managing to grow.
Inflationary pressures are likely to have been behind the slump with demand easing notably, particularly when it comes to new orders and export orders.
However, there are signs beginning to emerge that inflation is beginning to ease. Input cost inflation dropped to a 38-month low and manufacturers reporting their sharpest fall in input prices since the survey began, although price rises remain elevated within the construction and service sector.
Firms also showed an eagerness to continuing taking on new staff with a continued increase in staffing levels noted in July. All four sectors boosted their headcounts last month, albeit the pace of hiring slowed relative to June.
Falling headline inflation and hints from the Bank of England that its run of interest rate hikes is close to an end have also boosted moral amongst Northern Ireland’s private sector with the mood for the coming months positive.
“Business conditions may have taken a turn for the worse in July but sentiment amongst local firms for the year ahead has actually picked up,” Richard Ramsey, Chief Economist at Ulster Bank, said. “The interest rate outlook has improved slightly but the dark cloud of no Stormont Executive looks set to remain anchored over the economy for the foreseeable future.
“Whether the new rise in optimism is well founded or misplaced – time will tell.”
