PMI: Retail was the star performer in January with an increase in sales and retail employment rising at its fastest pace since May 2018

Cross-border shopping and the £600 energy payment has helped Northern Ireland’s retail sector grow during January, according to a new report.

The latest purchasing managers’ index (PMI) from Ulster Bank showed activity in Northern Ireland’s private sector ‘largely started this year the way 2022 ended, with falling levels of business activity and new orders’.

However, the report revealed ‘signs of the downturn losing pace’ with ‘softer falls in output and new orders recorded’ plus employment increasing with firms expressing optimism in the 12-month outlook.

The monthly survey is based on the experiences of local 200 businesses across the construction, manufacturing, retail and services sectors.

Commenting on the latest survey findings, Richard Ramsey, chief economist Northern Ireland, Ulster Bank, said: “Northern Ireland’s private sector largely started this year the way 2022 ended, with falling levels of business activity and new orders, alongside an easing in inflationary pressures. Both business activity and incoming orders fell for their ninth successive month, although the rates of decline slowed in January. Falling demand, in terms of new orders, was evident across all four sectors.

“However, there were also signs of improvement and pockets of optimism. Input cost and output price inflation eased to two-year lows but remain at elevated levels. Firms are still increasing their prices more than any other time prior to the pandemic.

“Employment growth accelerated to a six-month high with all four sectors increasing staffing levels in January. Indeed, Northern Ireland firms posted the fastest rise in employment levels of all 12 UK regions. That was despite the fact local firms posted the sharpest decline in output within the UK in January.

“This suggests that local firms are hoarding labour, given the difficulty in recruiting staff and widespread skills shortages. How sustainable this approach is will be tested in the months ahead. Retail was the star performer in January with an increase in sales and retail employment rising at its fastest pace since May 2018.

“The extreme pessimism reported in 2022 appears to have lifted. Only construction firms are expecting further falls in output in 12 months’ time. Manufacturing and retail are their most optimistic in 10 and 11 months respectively.

“The rebound in retail sales and sentiment is perhaps surprising in the midst of a cost-of-living crisis. However, there are two key factors likely to be driving this. Unlike Northern Ireland and the UK, the Republic of Ireland is neither in nor flirting with recession and cross-border shopping is providing some valuable support.

"During the second half of January, the £600 energy grant also started arriving with households, and in some instances, this subsidy seems, in part at least, to have found its way into the tills of local retailers.”