North business activity contracts again in July – The Irish Times
Economic clouds are gathering over Northern Ireland, with inflationary pressures causing further declines in customer demand in July, according to the latest Purchasing Managers’ Index (PMI) for the region, released by the Ulster Bank.
The seasonally adjusted business activity index fell to 41.9 in July, from 42.9 in June, to signal a sharp contraction in output in Northern Ireland’s private sector, and the sharpest since February 2021.
The report, produced for Ulster Bank by S&P Global, said falling demand has led to further production cuts and new orders in the private sector in the North. Inflation rates remained high during the month, despite signs of slowing, with a further rise in employment being the main bright spot in the latest survey.
“Households in Northern Ireland may be basking in the sun, but when it comes to the economy, the storm clouds continue to build. Last month has seen a new deterioration in local business conditions, with business activity contracting at its fastest pace in 17 months Apart from the Covid pandemic and lockdown restrictions, the rate of decline in business activity in July was the most high since November 2012,” said Richard Ramsey, Ulster Bank’s chief economist for Northern Ireland.
“The decline in market demand is attributed to rising prices. And even though the inflation rates for input costs and output prices are falling, they remain high. As a result, new orders fell for the third straight month and, excluding the pandemic period, at the fastest rate in more than a decade.
Businesses in the North cited growing difficulties in finding work in the Republic, Mr Ramsey added.
“Unsurprisingly, given the cost of living crisis, retail saw the steepest declines in sales and orders,” he said.
Retail sales have plunged over the past three months and retailers expect sales to still be at these lower levels a year from now. Companies in the service and construction sectors also remain pessimistic about the year ahead. Despite a marked decline in orders over the past few months, manufacturing is the only sector forecasting a recovery in activity.
“Positives remain rare in the latest survey,” Mr Ramsey said.
“However, employment continues to be a bright spot, with all four sectors increasing employment in July. But with the Bank of England forecasting a recession in the UK, a slowdown in the labor market is expected through 2023. That said, the labor market should be much more robust this time around than in previous recessions.