According to the latest Ulster Bank Purchasing Managers’ Index (PMI), businesses in Northern Ireland have seen an increase in output, driven by a growth in new orders.
Although only modest, it is the first increase in eight months after subdued demand meant that new orders had slowed down.
Richard Ramsey, chief economist at Ulster Bank, said: “The biggest surprise in the latest survey was the surge in business confidence.
“Local firms were their most optimistic about future output levels in 12 months’ time since May 2021.
“The positive sentiment was evident across all four sectors. The renewed optimism was linked to the launch of new products and higher orders.
“Significantly, the notable improvement in the outlook predates the restoration of Stormont. The impact on sentiment of the political developments should become apparent in February’s survey.”
Three of the four sectors registered increases in business activity, with construction continuing to be the exception.
Mr Ramsey said: “NI’s private sector started 2024 on a stronger footing, with most of the indicators of business conditions improving relative to December.
“Output expanded for the second month running, with manufacturing, services and retail all recording increased levels of business activity in January. Construction remained an outlier, with activity falling at a substantial rate and at its fastest pace in 12 months.”
He added that despite a continued slump in export orders, a pick-up in domestic demand led to the first increase in new orders in eight months.
But although spare capacity remained evident at the start of the year, the renewed increase in new orders meant that a decrease to backlogs of work slowed down for the first time in seven months.
A surge in retail demand and a return to growth in manufacturing orders offset the “continued declines in services and construction”, said Mr Ramsey.
The results of the report indicate that the rate at which input costs and output prices are rising eased in January.
Rising costs were predominantly associated with higher wages and transportation costs.
“Inflationary pressures moderated with December’s increases reversed in January,” said Mr Ramsey
“Despite some pick-up in transportation costs, input cost inflation eased to a six-month low.
“Some firms highlighted that re-routing of shipping away from the Suez Canal had caused longer delivery lead times.
“But there was no overall change in supplier delivery times amongst manufacturers in January. Manufacturers have been cutting their prices for the past eight months and reduced them in January at their fastest pace since February 2010.
“Services, construction and retail, though, all raised prices at a quicker pace.”
According to the findings, companies continued to take on additional staff for the 13th month running.
“Staffing levels continued to rise, with manufacturing (marginally), services and construction firms all increasing their headcounts,” he added.
“Meanwhile, retailers reduced their staffing levels for the first time in 16 months.”