The soaring rate of inflation has tempered growth in the Northern Ireland economy but companies continue to hire at pace.
Those are the findings of the latest Purchasing Managers’ Index report from Ulster Bank which showed the province’s economy was still growing last month, but only just.
Input costs and output costs rose at a record rate as higher charges for energy, freight and fuel, materials and increasing wage expenses.
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Because many of the costs are being passed on to customers by businesses, new orders fell while the constrained supply chain showed no sign of easing with deliver times lengthening and backlogs of work increasing.
The findings chime with latest figures from the Office for National Statistics which show consumer price inflation stood at 4.5% last month.
Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said the sustained period of inflation and supply chain pressure are starting to bite on business performance.
“The rate of growth in business activity slowed during October while input cost inflation rose at a record rate,” he said. “This isn’t surprising given the incoming news flow regarding energy costs and firms are passing these costs onto their customers by raising the prices of their goods and services at a record rate.
“Perhaps the most telling indicator is new orders which shows that incoming business fell for the second month running with all sectors bar manufacturing posting a fall in new orders. Construction saw the steepest decline, with firms citing price increases as a factor putting off customers.”
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But with companies rushing to raise capacity, staffing levels increased markedly in October, the fastest pace since May.
“Firms reported one of the fastest increases in headcount in the survey’s history,” he said. “Manufacturing led the way in this, with firms in the sector posting the fastest rate of job creation on record. They are recruiting at pace to increase their capacity to deal with a buoyant order book and mounting backlogs.
However, expectations that inflation will remain high are dented the outlook for the future.
“Survey respondents’ expectations for activity in 12 months’ time slipped to a nine-month low. Whilst manufacturing, retail and services firms still expect growth, construction businesses expect activity to fall. The latest survey’s theme of slower growth, higher inflation and supply chain disruption are expected to continue in the run-up to Christmas.”