New orders for private sector firms in Northern Ireland took a tumble at the end of last year. Subsequently output fell, but there is maybe a chink of light at the end of a very long tunnel as inflationary pressures are showing signs of easing. This news is according to the Ulster Bank purchasing managers’ index for December.
The fall in new orders is probably expected as we have seen the worst cost of living crisis for many, many years, allied to rising costs for businesses due to the steep increase in energy prices.
The Private Sector Was In Expansion Mode In Early 2022
Speaking about the index report, Richard Ramsey, chief economist at the Ulster Bank, is quoted in an article in the Belfast Telegraph as saying:
“Northern Ireland’s private sector started last year in expansion mode as the post-pandemic economic recovery gathered pace,
“Last January, businesses were optimistic for the year ahead with the expectation that growth would continue. This proved not to be the case. Largely as a result of the Russian invasion of Ukraine, which added fuel to the cost-of-living crisis, growth petered out and confidence ebbed away.”
In fact there was a sharp decline in output at the end of last year, the biggest decline since February 2021. Mr Ramsey went on to say in the article:
“Northern Ireland’s private sector therefore ended the year on a much more negative note. December saw output and orders fall for the eighth successive month. The contraction in output was the steepest in a decade outside of lockdowns. All four sectors posted declines in output and orders although retail, services and construction firms did increase their staffing levels.
Inflationary Pressures Have Moderated
“The good news is that inflationary pressures moderated with firms reporting the weakest rise in input costs in 22 months. As a result, firms raised their prices at their slowest pace in almost two years. But these price rises still exceed anything that occurred in the pre-pandemic era.
“This time last year, firms were braced for a challenging year, but it turned out much worse than anticipated. December’s report suggests that negative sentiment is receding and that we may have passed peak pessimism. This year, expectations for the 12-months ahead are low but we could see the converse of last year with expectations being exceeded this time around.”
So there was bad news in the report but also some good news in that we could be past the worst when it comes to inflation, which has such a damaging effect on the economy and business.