Two-speed economy 'increasingly emerging’ in North

The North is turning into a two-speed economy due to stagnation at Stormont, public sector funding and a cost of living crisis, a new report suggests.

Ulster Bank’s latest Purchasing Managers’ Index showed Northern Ireland’s private sector output continued to grow in June, and employment also accelerated.

But that growth was driven by the services sector and manufacturing, with construction in particular experiencing a very weak month.

Retail sector output also fell in June.

New orders fell for the first time in five months in the survey, based on the experiences of 200 businesses in the North’s construction, manufacturing, retail and service sectors.

Richard Ramsay, chief economist at Ulster Bank, said companies were citing a lack of public sector contracts as a factor.

„The two-speed economy is becoming increasingly clear,” he said.

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Mr Ramsey said June’s PMI exposed a significant decline in business confidence, with construction firms expecting business activity to slow significantly over 12 months, while retail businesses expected sales to be flat.

„On the contrary, manufacturers and service sector companies still expect higher levels of activity in the middle of next year,” he said.

“It is no coincidence that the sectors most exposed to the lack of an NI executive and the cost of living crisis – construction and retail respectively – are least optimistic.

„Construction firms in particular hope to return to Stormont in the second half of the year, but there is no real chance of the cost-of-living crisis dissipating for the rest of 2023,” the economist said.

„Higher interest rates are weighing heavily on both business and consumer sentiment, and this aspect is expected to stay with us for the foreseeable future.”

On a more encouraging note, the latest PMI showed inflationary pressures continued to ease in June, with input costs and output prices continuing to rise, but at the slowest pace of 33 and 32 months respectively.

„If input costs go up, that’s linked to wage pressures,” said Richard Ramsey.

“Meanwhile, manufacturing has seen its input costs fall for the first time in three years.

„The easing of inflationary pressures is accompanied by another welcome development – a significant reduction in supplier delivery times, notably in retail sales.”