Business activity falls for first time in 14 months, and outlook bleak

The bank’s monthly PMI is a survey of firms that tracks indicators such as new orders, employment and exports.

The May data – produced for Ulster Bank by S&P Global – signalled reductions in output and new orders as steep inflationary pressures hit demand. Indeed, output price inflation was at a record high.

The impact of price pressures also hit business expectations, which turned negative.

However, the report also showed that employment continued to rise.

Richard Ramsey, chief economist for Ulster Bank in Northern Ireland, said: “Economic forecasts at a global and UK level continue to be downgraded on an almost monthly basis.

“The latest survey of Northern Ireland’s private sector saw the deterioration in business conditions accelerate in May.

“Local firms reported a fall in business activity for the first time in 14 months with the significant declines in retail and construction outweighing continued growth within the manufacturing and services sectors.

“Inflationary pressures and heightened uncertainty are hitting demand and delaying investment, its presence felt, particularly on retail, with both sales and new orders slumping in May.

“Construction remains mired in an order book recession with last month’s steep decline marking the 11th successive month of contraction.”

Mr Ramsey added: “The overall outlook is for things to get worse, with new orders falling at their fastest pace since February last year.

“Northern Ireland firms’ order books contracted at the fastest rate amongst the 12 UK regions.

“Manufacturing, services, construction and retail all contributed to the drop in incoming business.

“Despite the advantages afforded to local firms through the NI Protocol, Northern Ireland firms remain the least optimistic of any UK region regarding sales/activity in 12 months’ time.

“Local firms expect sales and activity to fall in a year’s time, with this negativity driven by retail. Manufacturing is the only sector projecting meaningful growth in 12 months’ time.

“Overall, with economic conditions set to deteriorate, the call for the chancellor and Stormont to provide additional support for business is set to intensify.”

The report said the headline seasonally adjusted business activity index fell to 49.0 in May, down from the reading of 54.8 seen in April and below the 50.0 no-change mark for the first time in 14 months.

Falling new orders, increases in the cost of living and market uncertainty were the main factors leading output to decrease.

Activity declined in the construction and retail sectors, while softer expansions were seen in manufacturing and services.