Northern Ireland’s economy reported a bittersweet performance last month, with bullishness from private sector growth at a seven-year high tempered by record inflationary pressures.
Ulster Bank’s keenly watched PMI report revealed that firms had largely shaken off the impact of the Covid-19 pandemic with rates of growth in output and employment growing, albeit at a slower pace than in May.
Unsurprisingly, services companies reported their fastest rates of growth in business activity in over seven years, a move related to the fact June was the first full month many hospitality businesses had been open since lockdown restrictions were eased.
The report showed the outlook looks good for the near term with order books filling up fast as new orders also climbed at the fastest pace in seven years.
Meanwhile, backlogs of work hit a 19-year high as a result of rising demand but also disruptions to supply caused by Brexit with supplier delivery times lengthening considerably.
While the report was littered with positive news, the inevitable impact of a swift ramp up in economic activity has been inflation.
Input costs, from the likes of raw materials, wages and shipping costs, rose at a record rate, Richard Ramsey, Chief Economist of Ulster Bank, said, particularly in the construction sector.
“Firms in the construction industry posted the steepest rates of input cost inflation with the index hitting 97.5!” he said. Businesses are passing these increased costs onto their customers at record rates.”
Mr Ramsey said he expected the inflationary pressures to remain in place for some time.
“Once again, construction firms, followed by retailers, are posting the steepest price hikes. It is expected that supply chain disruption and significant inflationary pressures will be a feature of the business environment for the rest of the year and well into 2022.”
