North’s economy slows as inflation subdues growth in activity

The rate of job creation is slowing in Northern Ireland and inflation has “subdued” growth, according to Ulster Bank research. This comes as the cost of living emerged as one of the main issues in the latest Assembly elections that saw Sinn Féin win the most seats over the weekend.

Ulster Bank’s purchasing managers index (PMI) for April suggested business activity is still growing in all sectors apart from construction, but that the rate of expansion has softened considerably each month this year. The survey found that delays to deliveries from suppliers remained “widespread”, while business confidence is subdued to worries about escalating costs.

The survey says “capacity constraints” are emerging in the manufacturing sector due to a labour shortage and a backlog or orders. Meanwhile, the rate of growth in new orders is slowing, as Ulster Bank says it expects the North’s economy to deteriorate in the second half of the year.

Richard Ramsey, the bank's chief economist for Northern Ireland, highlighted the war in Ukraine and renewed lockdowns across China as reasons behind the slashing of growth forecasts in many regions last month.

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New orders

“Northern Ireland was no exception with firms reporting slower rates of growth in output, new orders and employment,” he said.

“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 [PMI] survey began almost 20 years ago. Indeed, inflationary pressures continue to be more intense in Northern Ireland than in all other UK regions.”

He said the rate of employment growth in the North’s manufacturing sector had slowed to a 14-month low. Across the region’s economy, he said “optimism for the year ahead remains relatively muted with the cost-of-living crisis making retailers the least optimistic”.

Mr Ramsey said the economic challenges meant it was important to quickly form an executive following the assembly elections to implement reforms and investment.