NatWest now sponsor the UK regional PMIs

The regional PMIs reveal that job creation, input & output cost inflation was strongest in Northern Ireland. Business confidence in Northern Ireland for the year ahead was the lowest of the 12 UK regions.

Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said:

“Faster growth is the main theme of the latest Northern Ireland PMI, with business activity, new orders, and employment all seeing their respective indices rising at increased rates in May. This is particularly the case for the services sector, which was the biggest riser for the second month in a row.

“Perhaps the most positive aspect of the May survey is the continuing increase in export orders, which are growing at their fastest rate this year and, significantly, well above their long-term average. Clearly, firms are capitalising on buoyant export markets, most notably the Republic of Ireland and the US, as well as the favourable exchange rate.

“On the other hand, the UK is one of the slowest growing economies in Europe, which means that those Northern Ireland firms focused on the domestic market are faring less well. Construction orders, for instance, saw just marginal increases, while retailers saw new orders stagnate. Indeed, firms in these two sectors are the least optimistic with regard to the 12-month outlook, and retail confidence is at a 13-month low.

“With regard to construction, Northern Ireland’s political situation and the lack of decision-making will likely have a bearing on sentiment for the foreseeable future. Meanwhile, strong rates of inflation are a key factor in dampening the retail sector’s performance, squeezing firms’ profitability as well as consumers’ ability to spend.

“More broadly, inflation remains a key challenge across the board, with service sector firms seeing input cost inflation rising at the fastest rate in more than seven years, driven by wage pressures. As a consequence, they are increasing their prices / fees more quickly than at any time since 2008.

“Whilst construction and retail are less upbeat than other sectors - and there is no shortage of uncertainty on the horizon for Northern Ireland’s private sector - overall optimism is still relatively strong. Almost a third of firms surveyed expect to expand their business in the year ahead; three times more than the number expecting a decline.”

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