‘Significant momentum loss’ for North’s firms amid soaring prices

Consumer demand deteriorated more rapidly in Northern Ireland in June than anywhere else in the United Kingdom, according to Ulster Bank research.

Ulster Bank’s purchasing managers’ index (PMI) for June suggested that business activity declined sharply last month from May, with the slide in output the most dramatic since February 2021. Activity fell in all four sectors included in the research: manufacturing, construction, retail and services.

New orders declined in all four sectors, led by manufacturing, where the fall was steepest since the first wave of Covid-19 in 2020. Outside of lockdown periods, Northern Ireland’s manufacturers reported that June saw their biggest month-on-month fall in output in the 20-year history of the survey, said report author Richard Ramsey, chief economist for Northern Ireland at Ulster Bank.

“Anecdotal evidence indicated that the main factor underlying falls in both output and new business was sharply rising prices, with customers increasingly hesitant to commit to new projects,” the research noted.

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Coupled with the current political uncertainty surrounding the Northern Ireland protocol, expectations that customers will continue to trim spending plans led to a big drop in overall business sentiment, Ulster Bank said, with firms at their most pessimistic since October 2021.

On a more a positive note, the June data suggests that job creation continued apace in Northern Ireland last month despite difficult conditions. Employment levels have now risen for 16 successive months, the research noted, and each of the four sectors recorded a rise in employment in June.

“Northern Ireland firms reported a significant loss of momentum at the end of the first half of the year,” said Mr Ramsey, with the slump in new orders deepening across the economy.

“Demand conditions in June deteriorated more significantly in Northern Ireland than elsewhere, with local firms reporting the steepest declines in output and orders of the 12 UK regions,” he said with the drop-off in retail demand observed in May’s survey continuing into June.

“While many manufacturers have benefited from the Northern Ireland protocol, the current political impasse between the UK government and the EU raises concerns over the durability of these benefits and therefore how the trade agreement will evolve. This, alongside a realisation that an economic slowdown is gathering pace, helps explain why Northern Ireland manufacturing has gone from the most optimistic sector to the most pessimistic in the space of one month.”