North’s Economic Growth ‘Solid’ But Slower Than UK Average.

Growth in Northern Ireland’s economy remained “solid” last month, according the latest data.

The Purchasing Managers’ Index (PMI) produced for Ulster Bank by Markit recorded output and new order rising for the third successive month.

It found backlogs of work and employment increasing while cost inflation was at its fastest rate this year.

Although growing, the rate of expansion was weaker than the UK average, hampered by falling activity in the construction sector.

The sharpest increase in new orders was at retailers while new export orders also rose.

Staff levels at Northern Ireland businesses grew for the sixth consecutive month – up in manufacturing and services but down in construction and retail.

The rate of input price inflation quickened to the strongest since December 2014 in July and was faster than the UK average.

According to respondents, higher staff costs and increased raw material prices were behind the latest rise in cost burdens.

Services and construction posted the sharpest rises in input prices, while no change was seen in the retail sector. A solid increase input prices was recorded at manufacturing firms.

The construction sector posted the fastest rise in charges, while slight increases were seen in services and retail. The only sector to record a fall in output prices was manufacturing.

Ulster Bank’s chief economist in Northern Ireland Richard Ramsey said the latest increase in private sector activity “was again solid, albeit unspectacular relative to the expansion seen in parts of 2013 and 2014”.

“However, the current growth rates are more in line with those prior to the financial crisis, and are therefore potentially more sustainable,” he said.

“Alongside growth of activity was another solid increase in new business which again led to a rise in backlogs of work. In fact, outstanding work either not completed or not yet started increased back-to-back for the first time since Q3 last year. As part of efforts to alleviate this, staffing levels were raised again, albeit at only a modest pace.

“Delving into the latest sector data, we see a welcome return to growth in activity at retailers in July, following a sustained period of contraction, joining the manufacturing and service sectors in expansion mode. However, the local construction sector continues to struggle, seeing a further drop in activity and new orders.

“The relative strength of sterling against the euro has made sales to euro area countries difficult for local firms in recent months, but companies were able to overcome this to some extent in July, posting marginal growth in new export orders. This likely reflects the continued strong performance of key trading partner the Republic of Ireland. This factor, alongside a generally improving UK economy, should provide opportunities for growth at Northern Ireland firms in the coming months.”