Reports show that business activity has declined more steeply than anywhere else in the UK last month with the services sector an area that has been particularly badly hit, with bars, hotels and restaurants having a torrid time.
Increased Input Costs & Raw Material Prices
One small sliver of hope though is that the rate of job cuts was the least it has been over the last 10 months since coronavirus reached our shores, although employment figures did still fall during December. Input costs increased significantly because of higher raw material prices in the main, along with shipping costs due to problems with freight.
Positivity Due To Covid Vaccines & Brexit Deal
But there was some positivity in the business community which is down to two main points. Firstly the launch of the Covid-19 vaccines, which it is very much hoped will get enough people vaccinated by late spring to protect the vast majority of the population, so that things can return to something like normality. And secondly the last ditch Brexit deal which is a huge boost to the Northern Ireland economy.
Ulster Bank chief economist Richard Ramsey is quoted in the Belfast Telegraph today, saying:
“Northern Ireland’s private sector ended 2020 the way it began the year with business activity contracting at the same pace in December as in January (46.8),” he said.
“The local economy experienced six months of contraction during the first half of 2020, including the record rates of decline across a range of indicators in the second quarter.
“Indeed, some of the PMI indicators hit single-digits, a feat that was unheard of prior to the pandemic and the use of lockdowns.”
He said there had been a “robust rebound” in the third quarter.
“However, this recovery was shortlived and faltered as renewed lockdown restrictions triggered three months of contraction during the final quarter of the year,” he added.
“Meanwhile, export orders notched up their 23rd successive month of decline,” he said.
“The one area where growth is accelerating is inflation.
“Input costs rose at their fastest pace since August 2018 with inflationary pressures most marked amongst manufacturers.
“In turn, firms are passing on these higher costs, such as freight and raw materials, to their customers. As a result the selling prices of goods and services are rising at their fastest rate in almost two years.”
There Were Grounds For Optimism In The Services Sector
Mr Ramsey did believe that, although the services sector had recently been badly affected, there were plenty grounds for optimism that this sector would bounce back strongly during the course of 2021. He also said that there would be expected teething problems with trade across the Irish sea until the new trading arrangements are properly bedded in.
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