Northern Ireland’s private sector continued to contract last month as the pressures from the cost-of-living crisis, relatively high interest rates and worries over the wider economic outlook continued to weigh.
However. the first signs of optimism have emerged from an easing in the rate of price hikes with input costs and output price inflation easing to two-year lows, according to the latest PMI report from Ulster Bank.
The report said there are signs the downturn is beginning to lose pace while companies were more optimistic about the next 12 months and employment increased.
The latter move is perhaps the most surprising given widespread suggestions the tight labour market of the last few years was starting to ease considerably.
Richard Ramsey, Chief Economist at Ulster Bank, said the increase may be a result of cautious management of the labour pool.
“This suggests that local firms are hoarding labour, given the difficulty in recruiting staff and widespread skills shortages. How sustainable this approach is will be tested in the months ahead,” he said.
In terms of the outlook for the future, only construction firms are expecting a further contraction in their industry, while retail and manufacturers are the most optimistic.
Mr Ramsey said proximity to the Republic and recent government energy support may be helping the retail sector.
“The rebound in retail sales and sentiment is perhaps surprising in the midst of a cost-of-living crisis. However, there are two key factors likely to be driving this,” he said. “Unlike Northern Ireland and the UK, the Republic of Ireland is neither in nor flirting with recession and cross-border shopping is providing some valuable support.
“During the second half of January, the £600 energy grant also started arriving with households, and in some instances, this subsidy seems, in part at least, to have found its way into the tills of local retailers.”
