Output growth eases again in February, but remains solid

The latest PMI report – produced for Ulster Bank by Markit said the rate of expansion had slowed from the high seen at the end of last year.

However, it said that while inflation of input costs and output prices remained elevated, new orders and employment rose at sharper rates, with growth of each broadly in line with the UK average.

“Whilst business activity continued to expand in February, it was the second month in a row in which growth eased, following a trend in the wider UK economy,” said Richard Ramsey, chief economist for Northern Ireland with the Ulster Bank.

“On the positive side, both new orders and employment growth quickened, with the rate of job creation hitting a five-month high. All four segments of the private sector also recorded increases in both output and employment, with construction returning to expansion after ten months of contraction, and retail - the fastest growing sector - continuing to experience buoyant demand.”

Nevertheless, he said significant inflationary pressures continued to be a key theme, with price rises evident across all sectors.

“The manufacturing sector saw the most marked increase in its cost-base, with input prices rising at their fastest rate on record,” Mr Ramsey said.

“Where possible, manufacturers seem to be passing these increased costs onto their customers, evident in a record rise in output prices.”

Higher prices were also apparent in the retail sector, with input price inflation at a high of almost eight-and-a-half years.

Retail prices are also rising driven by the weak sterling, the flip side of which, he said, was a continuing strong export performance driving growth in manufacturing and cross-border retail.

“However, the challenge in the months ahead will be to maintain growth in the face of such strong inflationary pressures, alongside no shortage of political challenges.

“The danger is that the economy takes a back seat as politicians grapple with triggering Article 50 in the UK and re-establishing political stability in Northern Ireland.”