Northern Ireland’s economy has started the new year with a spring in its march, ignoring the impact of the Omicron variant Covid-19 to show growth, according to Ulster Bank’s latest PMI report.
It saw an uptick in new orders and production and as the economic mood looked rosier, the threat of rising inflation, a tight labor market and even more instability in Stormont weighs on the business world.
The main PMI, the business activity index, rose to 54.7 in January from just 50.2 in December, the fastest increase in output since June last year.
The manufacturing sector led the charge higher with the influx of new orders and an increase in the workbook, with only the construction sector lagging behind and posting a drop in activity.
Although companies hired additional staff last month, the limited availability of staff was reflected in job creation falling to its lowest level in 10 months.
The impact of inflationary pressures has been evidenced by the fact that input and output costs have increased significantly, with the prices of energy, freight, fuel, materials and wages all increasing.
However, there was cause for optimism, with the PMI showing that business confidence has strengthened amid hopes for an improving pandemic and supply chain situation and confidence in prospects for new orders.
“Northern Ireland’s private sector has shaken off the Omicron-induced slowdown seen in December and started 2022 on a high note,” said the chief economist for Northern Ireland at Ulster Bank, Richard Ramsey. “In January, growth in business activity accelerated to a seven-month high, while new orders increased for the first time in five months.
“Employment also rose for the eleventh consecutive month, but with companies finding it increasingly difficult to recruit the staff they want, the pace of hiring slowed to its lowest rate since March. “In effect, retail and construction have effectively reduced their workforce. Although inflationary pressures have eased from their peaks, they remain a significant challenge.”
He said the report showed the economy was in good shape but faced a series of challenges.
“Overall, the January PMI is a positive report, but as Omicron and even Covid as a whole wane, skills shortages, the cost of living crisis and the latest wave of political instability in Northern Ireland North will bring many headwinds to challenge businesses in 2022.”