Northern Irish business sentiment up on back of weaker pound

A weaker pound helped Northern Irish firms win new orders from the South last month as private-sector business activity in general hit its highest levels so far this year, latest research shows.

The Ulster Bank purchasing managers’ index (PMI) for April highlights that there was a strong rise in output levels during the month, largely driven by new business contracts – with orders from outside the UK, in particular, hitting a three-month high.

The PMI shows that the North’s service sector reported the fastest increase in business activity last month, while manufacturing output also increased.

Although there was little change in the construction sector’s performance during April, in contrast, retail companies reported a slowdown in growth.

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But Richard Ramsey, Ulster Bank’s chief economist in Northern Ireland, said this was not unexpected. “Retailers have enjoyed a cross-Border shopping tailwind since June last year. Not surprisingly, though, the rapid rates of growth in retail sales activity have eased significantly.

“The pace of job creation in retailing has also slowed, to its weakest rate since July 2015,” Mr Ramsey said.

A good April

Overall April proved to be a good month for job creation in the North, as firms across all four key sectors – retail, manufacturing, construction and services – all recruited new staff.

Mr Ramsey said the strong job creation statistics coupled with a rise in export orders and increased business activity is evidence that the North’s private sector has had an “encouraging start” to the second quarter of the year.

But he has also warned that inflationary pressures remain a key challenge for local firms, and while sterling’s weak run may have helped exporters, it has at the same time hurt some businesses because it has pushed costs up.

“Input cost inflation remains most acute for manufacturers. But retailers and service-sector firms are far from immune, seeing their cost bases increase at the fastest rates since September 2008 and March 2011 respectively,” Mr Ramsey added.

The latest PMI research also suggests that local businesses were more positive about their outlook in April than they had been a month previously, with firms largely expecting business activity to grow over the year.