The Ulster Bank Northern Ireland PMI produced for Ulster Bank by IHS Markit pointed to faster rises in output and new orders, supporting further job creation.
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Sterling weakness played an important role in the local economy, helping firms to secure new export orders but also adding to inflationary pressures.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: “In August, Northern Ireland firms reported faster rates of growth in business activity than the UK average for the first time this year.
Whilst Northern Ireland saw an 8-month high in the rate of business growth, UK firms posted the slowest rate of expansion in six months.
The fact that London and the South East are not acting as the traditional dynamo of the wider economy is a major factor.
“It would appear that Northern Ireland is benefiting from the robust recovery in the Eurozone.
Indeed, the latter is currently growing at twice the rate of the UK.
Northern Ireland firms are taking advantage of having one of the fastest growing economies in Europe – the Republic of Ireland - on its doorstep.
Throw a weak currency into the mix and the conditions are ideal for local firms selling into the Republic of Ireland / Eurozone market.
“All sectors saw their rates of business activity rising in August.
Services though was the stand-out performer.
Indeed, its output and employment hit 17-month and 41-month highs respectively.
Although activity in the construction sector grew, it was only marginally so.
Meanwhile manufacturing and retail both rebounded from their recent lows, with sterling’s weakness acting as a tailwind in both sectors, for now.
“A major challenge remains inflation.
Indeed, construction saw the fastest rise in input cost inflation in eight months.
Firms appear to be passing their rising costs onto their customers with the price of goods and services rising across all sectors.
“Looking ahead, the robust rates of growth in new orders across most sectors bodes well for activity in the months ahead.
However, inflationary pressures will act as a break on consumer spending in the domestic market.
And longer-term economic prospects are clouded political uncertainty on a number of levels.” ■