Business activity in the private sector slowed down in July for the first time in months across all areas (but especially in construction and retail), according to the latest survey from the Ulster Bank purchasing managers’ index (PMI). However it seems that most businesses are still very optimistic about what the rest of the year holds for them.
Weak Demand And Inflation To Blame
The fall in business activity appears to be down to weak demand and the impact of inflation. The lack of a functioning Executive is also an issue, but despite all this firms are still looking to take on extra staff to run their business, which is always a big sign that they remain confident that things will improve in the near future.
Here is what Ulster Bank chief economist Northern Ireland, Richard Ramsey, had to say about this latest survey in an article today in the Belfast Telegraph. He said:
“Business conditions may have taken a turn for the worse in July but sentiment amongst local firms for the year ahead has actually picked up,
“The interest rate outlook has improved slightly but the dark cloud of no Stormont Executive looks set to remain anchored over the economy for the foreseeable future.
“Whether the new rise in optimism is well founded or misplaced – time will tell.
“Following a notable softening in new orders during the second quarter, local businesses started the third quarter with activity falling for the first time in six months.
“The deterioration was broad-based with three of the four sectors contracting. Only services activity managed to hold up in July, albeit flatlining.
“The near-term outlook is for a further softening in demand with new orders declining for the second month running. All four sectors posted a fall in orders with the pace of decline the most marked within the construction and retail sectors.”
Manufacturers Recording Sharp Fall In Their Input Prices
He also went on to say that:
“Input cost inflation eased to a 38-month low with manufacturers recording their sharpest fall in their input prices since the survey began,
This has led manufacturers to lower the price of their goods for the second month running. Inflationary pressures remain more stubborn within the construction and service industries.
“Both these sectors, unlike retail and manufacturing, reported input cost and selling price inflation well above the average rates pre-pandemic. Firms reliant upon imports from abroad will be pleased.”
We hope that this business optimism is well founded, certainly confidence breeds confidence so they are certainly showing the right mindset to prosper in the near future.