Whilst the private sector is showing encouraging signs of growth not all areas are looking promising as we see signs of a two speed economy emerging. The latest survey by the Ulster Bank has found that the manufacturing and services sectors have expanded nicely in June, whereas the retail and construction sectors have reduced their activity.
Economy Is Growing Despite Ongoing Issues
The retail sector is finding it difficult as consumers are getting hit by rising interest rates and inflation, and the construction sector is being hit by reduced public sector spending. But overall the economy is growing despite the high interest rates and the lack of a working government in Stormont.
No Prospect Of The Cost Of Living Crisis Dissipating Any Time Soon
Speaking about the latest survey, Richard Ramsey, Chief Economist at Ulster Bank in Northern Ireland, is quoted in an article on the Business Live website, saying:
“It is not coincidental that the sectors most exposed to the lack of a NI Executive and the cost-of-living crisis – construction and retail respectively – are the ones that are the least optimistic. Construction firms in particular will be hoping we see a return to Stormont in the second half of this year, but there is no real prospect of the cost-of-living crisis dissipating in the remainder of 2023.
High Interest Rates Weighing Heavy On Business And Consumer Sentiment
He said a strong interest rate environment is also hampering growth.
“Higher interest rates are also increasingly weighing on both business and consumer sentiment and this feature is expected to be with us for the foreseeable future too,” he said.
However, there are increasing signs that the inflationary pressures which have prompted interest rate rise are beginning to ease.
“It was encouraging to note that inflationary pressures continued to ease with input costs and output prices rising at the slowest pace in 33 and 32 months respectively. Where input costs did rise, it was linked to wage pressures.
“Meanwhile, manufacturing saw its input costs fall for the first time in over three years. The easing in inflationary pressures is being accompanied by another welcome development – a marked shortening in supplier delivery times, most noticeably within retail.”
Whether the spiraling interest rates are having the effect of slowing down the rate of inflation or not, it would be good to see them come back down in the not too distant future, as they are causing a great deal of pain to many households and could be holding back economic growth quite considerably.