Ireland: Northern Ireland's economy bouncing back

The month of May saw additional businesses reporting increase in both output and new orders than those that did not, according to the Ulster Bank's Purchasing Managers' Index (PMI).

The index provides a benchmarked snapshot of the economic outlook. It as well found an increase in staff being hired last month.

Richard Ramsey, Ulster Bank's chief economist in Northern Ireland, welcomed the findings: "The new survey offers encouragement, next a disappointing start to the year, with firms presently reporting a significant development in business conditions," he said.

“Northern Ireland's private sector reported its fastest rate of increase in business activity and new orders during May in seven months. Furthermore, firms have continued to increase their staffing levels at a faster rate than the long-term average prior to the downturn."

The news isn’t all positive, however, and Mr Ramsey cautioned that Northern Ireland's rate of recovery is still lagging behind other parts of the UK.

The weakening of the euro against the sterling has continued to cause problems for exporters trading with the Eurozone.

"Northern Ireland's recovery in new orders is linked to increased request within the UK market, as the strength of sterling vis-a-vis the euro continues to present a challenge for those exporting into the eurozone," he explained.

"Indeed, export orders fell for the fifth month in a row in May and have presently been flat or falling since October 2014.

"The manufacturing sector is the brightest spot in the May survey, posting a fourth successive monthly rise, and the fastest in seven months. Services as well performed relatively strongly, with its fastest rate of increase since the end of last year.

"The same cannot be said for the construction and retail sectors though, with construction experiencing a third month of falling output, and retail posting the weakest reading of all sectors, and its ninth consecutive monthly decline.

“At the same time as it comes to additional forward-looking indicators, new business activity gives some encouragement for the months ahead, with new orders rising at their quickest rate in seven months.”

Richard Ramsey, economist.

Summing up the index findings, the economist said: "In general, with the Northern Ireland economy experiencing a range of challenges, notably an unfavourable euro exchange rate and public spending cuts, inclunding considerable uncertainty ahead, the new Ulster Bank PMI provides some comfort in relation to the resilience of the local private sector.”

He added that it remains to be seen what the full extent of public spending cuts on the private sector will be and how long increase can be sustained.