The pace of contraction in the Northern Ireland economy picked up pace in September as a result of waning consumer confidence, rising prices and a broader economic malaise.
That is according the latest PMI report from Ulster Bank which painted the picture of an economy on the back foot even before the full negative impact of the Chancellor’s mini budget was felt.
All four sectors monitored by the survey fell during the month, with inflationary pressures cited as one of the largest challenges facing businesses. Input costs rose at levels not seen prior to May 2021, with services reporting the sharpest increase in their cost base as a result of soaring wage and energy costs.
The rate of contraction in new orders also accelerated amid deteriorating economic conditions, it said, while international demand also continued to fall.
Offering a glimmer of hope in the report was the jobs market, with firms nothcing up their 19 th consecutive monthly rise in staffing levels. But the pace of employment growth was the weakest in the sequence and manufacturing saw the first decline in staff numbers since February 2021.
Ulster Bank Chief Economist for Northern Ireland said the slowdown in hiring is linked to difficulties finding suitable staff rather than just reflective of falling demand. He said the expected further reductions in business activity will no doubt weigh more on hiring intentions in the months ahead.
The PMI comes as the UK’s credit rating came under threat following the falls in financial markets in reaction to Kwasi Kwarteng’s mini budget. Ratings agency Fitch put the UK on a ‘negative’ outlook while also calling into question the Conservative government’s fiscal policy. However, it stopped short of downgrading the UK’s AA- investment grade.
“‘Going for growth’ is the Chancellor’s new approach for his new era, but contraction was very much to the fore in the September PMIs in Northern Ireland, across the UK and indeed beyond,” Mr Ramsey said. “And this was before the turbulence that the Chancellor’s ‘mini budget’ caused, which doesn’t bode well for the rest of the year.
“We have started the fourth quarter of the year with heightened uncertainty, not least in financial markets and in politics,” he said. “Firms may be relieved to see energy cost pressures easing, accompanied by much needed government support. But borrowing costs have now moved rapidly in the opposite direction.
“It’s hard to see the Chancellor’s much desired growth coming any time soon.”
