The Northern Ireland economy has started the new year with a spring in its step, shrugging off the impact of the Omicron Covid-19 variant to post growth, according to the latest PMI report from Ulster Bank.
It saw an uptick in new orders and output and while the economic mood appeared to be looking rosier, the threat of rising inflation, a tight labour market and yet more instability at Stormont hangs over the business world.
The main PMI index, the Business Activity Index jumped to 54.7 in January from just 50.2 in December, the fastest increase in output since June last year.
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The manufacturing sector led the charge higher as new orders poured in and the backlog of worked rose, with only the construction sector lagging behind and posting a fall in activity.
While companies did take on additional staff last month, the limited availability of staff was reflected in the fact job creation fell to a 10-month low.
The impact of inflationary pressures was highlighted by the fact both input and output costs rose substantially with prices for energy, freight, fuel, materials and wages all heading higher.
However, there was cause for optimism with the PMI showing business confidence strengthened amid hopes of improvements in the pandemic and supply-chain situations and confidence in the outlook for new orders.
“Northern Ireland’s private sector has shaken off the Omicron induced slowdown seen in December and has started 2022 on a positive note,” Ulster Bank’s Chief Northern Ireland economist Richard Ramsey, said. “In January, growth in business activity accelerated to a seven-month high, while new orders rose for the first time in five months.
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“Employment also increased for the eleventh month running, but with firms finding it increasingly difficult to get the staff they want, the pace of hiring did slow to its weakest rate since March. Indeed, retail and construction actually cut their headcount. Whilst inflationary pressures have moderated from their record highs, they remain a significant challenge.”
He said the report showed the economy is in a good state but faces a range of challenges.
“Overall, the January PMI is a positive report but whilst Omicron and indeed Covid as a whole are fading, skills shortages, the cost-of-living crisis, and Northern Ireland’s latest round of political instability will bring plenty of headwinds to challenge firms in 2022.”