Northern Ireland’s economy continues to outperform other regions of the UK, according to the latest Ulster Bank Growth Tracker survey.
New orders also rose markedly once again and local companies expanded their staffing levels at the fastest pace in 16 months in response. Firms still faced growing capacity pressures, however.
Sebastian Burnside, NatWest Chief Economist, commented:
“There was no sign of a let-up in the performance of the Northern Ireland private sector in August, with local firms continuing to outpace all other UK regions and nations in terms of output growth.
“The sustained spell of growth has encouraged firms to take on extra staff, and they did so to the largest degree since April 2023. Such has been the speed of the inflows of new business, however, that companies were unable to make any dent in their backlogs of work which continued to expand markedly.
“The Northern Ireland manufacturing sector performed particularly strongly in August, posting sharper increases in production, new orders, employment and backlogs of work. Services was not far behind, but there was less positive news in the retail sector where sales moved into reverse.
“Hiring across the private sector pushed up staff costs, while salaries for existing workers were also reportedly up. This meant that input prices increased sharply again, and to the largest extent seen across the UK.
“One other thing to note was a first increase in new export orders in almost a year-and-a-half, in a sign that international sales are starting to join the party and provide a boost to overall growth.
“Local firms remained optimistic about the future, and looking at this set of data it’s not hard to see why.”
The main findings of the August survey were as follows:
The headline Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s private sector – rose to 55.7 in August, up from 54.9 in July and pointed to a rapid monthly increase in business activity in Northern Ireland. Output has now risen in each of the past nine months. Companies indicated that rising workloads had been behind the latest expansion of activity. Manufacturing production increased at the fastest pace in almost two-and-a-half years, with services activity also up sharply. Retail was the only category to post a fall.
The latest expansion of new business continued the trend that began in the opening month of the year. Despite easing to a six-month low, the rate of growth in Northern Ireland was broadly in line with the UK average. Expectations that new business will continue to rise in the months ahead supported optimism among companies that output will expand over the coming year. In some cases, activity is set to be boosted by improving operating capacity. Business sentiment strengthened slightly from July and was well above the series average.
Efforts to expand capacity in line with higher workloads led companies in Northern Ireland to raise employment again in August. Staffing levels have now increased in 20 consecutive months, with the latest rise the most marked since April 2023. The marked increase in employment was still insufficient to prevent a further build-up in backlogs of work, however, given sustained improvements in new orders. In fact, backlogs of work rose at a faster pace in August, with the rate of accumulation the strongest since April 2022.
Northern Ireland companies continued to register a sharp rise in input prices, despite the rate of inflation easing to a six-month low. Respondents indicated that rising staff costs had been the main driver of increased input prices. Sharp cost inflation was seen across each monitored sector, led by construction. Meanwhile, the pace of output price inflation picked up slightly as increased input costs were passed through to customers.