Three of the four sectors (retail, manufacturing and services) surveyed all reported growth, while construction was the only NI sector not in expansion mode in March.

The latest report – produced for Ulster Bank by S&P Global – pointed to growth gaining momentum in the private sector, while rates of inflation in both input costs and output prices continued to ease.

Ulster Bank chief economist Richard Ramsey said that business activity accelerated at its fastest pace in a year, with only London recording a sharper rate of growth.

“February’s report was summed up in the word ‘improvement’ and March was something of a rerun of this, with almost every indicator improving further on the previous month,” he said.

Inflationary pressures continued to ease in March and were at their weakest pace in over two years, but the pace of cost and price rises was still above the pre-pandemic long-term average.

“Another encouraging sign is that supplier delivery times for retail, manufacturing and construction shortened in March reflecting that global supply chains are returning to some kind of normality.

“Whilst we are seeing notable short-term improvements, and firms are relatively optimistic for the year ahead, there are lots of challenges that will impact on future growth,” he added.

“The slowdown in the global economy is one factor, but the outlook for the public finances is also bleak and this is compounded by the ongoing lack of a functioning Stormont Executive. Meanwhile, households will continue to battle with a cost-of-living crisis.”

The headline seasonally adjusted Business Activity Index rose to 54.9 in March from 52.2 in February. The reading indicated a sharper expansion in output in the private sector, and one that was the fastest for a year.

‘Whilst we are seeing notable short-term improvements, there are lots of challenges that will impact on future growth’

In fact, the rise in Northern Ireland was the second-sharpest of the 12 monitored areas of the UK, behind only London.

Panellists reported that higher sales amid improvements in customer confidence and demand had been behind the increase in output. Growth was seen in three of the four monitored sectors, the exception being construction. Retail posted the fastest increase.

Total new orders also expanded at the fastest pace for a year in March, the survey found, while new orders ticked higher for a second month running.

Firms ramped up hiring in March, in response to higher new orders, a solid build-up in backlogs of work and confidence in the outlook. Moreover, the rate of job creation was the joint-fastest in the survey’s history, and the latest increase was the fastest seen across all of the UK areas covered.

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Indeed, it was reported that retail was “the star performer” in January with an increase in sales and employment in the sector rising at its fastest pace since May 2018.

According to the latest report by Ulster Bank, there were “signs of improvement” with the retail sector enjoying employment growth.

The January data from the Ulster Bank NI PMI, produced for the bank by S&P Global, showed that while the private sector remained in “contraction territory” at the beginning of this year, there were “signs of the downturn losing pace”.

‘REBOUND IN RETAIL’

The monthly survey of 200 businesses in the retail, construction, manufacturing and services sectors, revealed that all four sectors recorded an increase in staffing levels in January.

Chief Economist Richard Ramsey said the rebound in retail sales and sentiment was “perhaps surprising” as Northern Ireland remains in the midst a cost-of-living crisis, but said there were two main factors driving it.

“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,” he said.

“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.”

It appears that the “extreme pessimism” reported last year “appears to have lifted” said Mr Ramsey, with only construction firms expecting further falls in output in 12 months’ time. Meanwhile, manufacturing and retail are their “most optimistic” in 10 and 11 months respectively.

EMPLOYMENT GROWTH

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

“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.”

Some of the main findings of the January survey showed the headline seasonally adjusted Business Activity Index remained below the 50.0 no-change mark in January, but rose to 45.3 from 41.6 in December, to signal a softer reduction in output at the start of 2023. However, activity has now fallen in nine successive months, with the latest decline linked to the challenging demand and inflationary environment.

“With output and new orders falling at softer rates, firms expressed renewed optimism in the year-ahead outlook for business activity, the first instance of positive sentiment since April last year,” added Mr Ramsey.

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