Economy Grows Once More But Interest Rate Rises Begin To Bite

It is great to hear that there was economic growth in the private sector in Northern Ireland for the fourth month in a row. But the rate of growth certainly slowed in the month of May and many economic experts are putting this down to both the rise in interest rates and the stagnation at the heart of government over in Stormont.

The services sector seems to be performing better than other sectors with a strong rise in business activity last month but construction has been performing poorly for the best part of two years now with no real sign of an upturn.

Fourth Successive Month Of Growth In Business Activity

Speaking about the latest monthly economic figures Richard Ramsey, chief economist at Ulster Bank Northern Ireland, is quoted as saying in an article in the Belfast Telegraph that:

“Northern Ireland’s private sector notched up its fourth successive month of growth in business activity in May, albeit it was the slowest rate of expansion in this sequence. Employment growth also eased to a four-month low but local firms increased their staffing levels at the fastest rate of all UK regions bar Scotland. New orders maintained the same modest rate of growth as April.

“A welcome slowdown was also evident in inflationary pressures, with input cost and output price inflation easing to its weakest level in around two-and-a-half years. It is encouraging to note that NI’s inflationary pressures are the least marked across the UK regions. There were some reports of energy prices coming down, with ongoing inflation linked to higher wages.

Services Sector Performing Well

“In terms of sectors, services was the only one to record a rise in business activity in May, with construction and retail joining manufacturing in contraction territory. Services also posted the strongest rise in new orders, followed by retail. Retail’s recent purple patch of growth in sales and orders appears to have passed although retail is still recruiting hard.

“Meanwhile the slump in construction orders continued and is approaching two years of continuous decline. But again, construction firms are increasing staffing levels to address long-standing skills gaps.

“Encouragingly all four sectors expect growth in business activity in 12 months’ time, with manufacturing the most optimistic and retail the least. But firms said that hikes in interest rates and political stagnation have been impacting on growth and cuts in public expenditure are also a concern. None of these factors is expected to go away any time soon.”

So if you are a half pint full kind of person you can point to monthly economic growth once more allied to increasing business confidence, however the more pessimistic among us will surely point to those pesky rising interest rates and lack of stability at the heart of government. Take your pick.