- Output rises for first time in four months
- Business confidence continues to recover
- Softer, but still sharp increase in input costs
The latest Ulster Bank Regional Growth Tracker signalled a renewed expansion in output for Northern Ireland companies as the second half of the year began, a marked turnaround from the sharp fall in activity seen in June.
Business confidence also improved, while employment broadly stabilised and the rate of decline in new orders softened. Weaker inflationary pressures were also signalled, but input costs and selling prices continued to increase sharply.
The headline Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s private sector – moved back above the 50.0 no-change mark in July, posting 51.4 from 43.9 in June. The rise was the first in four months.
Where output increased, panellists reported signs of improving customer demand. That said, the expansion in activity in Northern Ireland was still slightly weaker than the UK average. Three of the four broad sectors saw output rise, led by manufacturing. Only retail posted a fall.
Sebastian Burnside, Chief Economist for Ulster Bank, commented:
“The Northern Ireland Growth Tracker painted a much more encouraging picture of conditions in the private sector as the second half of the year began. Business activity bounced back into growth territory following difficulties in May and June, helped by signs of stabilisation in customer demand.
“There was also good news on the jobs front, with some firms looking to expand staffing levels. That said, there were continued reports of the difficulties faced in finding the right workers, which ultimately limited the extent to which companies were able to hire.
“Inflationary pressures remained persistent but increased domestic political stability may support more confidence about the future for Northern Ireland businesses in the coming months. Should this optimism continue then we may see stronger business performance in the second half of the year than in the first.”
Mark Crimmins, Ulster Bank Managing Director Corporate, Commercial and Business Banking, added:
“Our Ulster Bank Growth Tracker data found renewed activity and confidence among Northern Ireland businesses in July. While inflation remains challenging, increases are continuing to slow, which alongside greater output levels has created a more favourable environment for firms.
“If these positive trends strengthen then we may see growth continue for Northern Ireland’s business community for the rest of 2026.”
The main findings of the July survey were as follows:
Although companies in Northern Ireland continued to record falling new orders in July, the rate of decline eased markedly from June and was the slowest since April amid some reports of improving market confidence.
Meanwhile, business confidence continued to recover from the negative outlook signalled in May, with optimism hitting a four-month high in July. Good pipelines of new business and planned investment were among the factors supporting confidence in the outlook for output. Around one-third of respondents were optimistic, while 22% expect business activity to fall.
Employment was broadly unchanged in the Northern Ireland private sector in July, following a modest reduction in June. Some firms took on extra staff to support expansions in output, but others continued to limit the replacement of leavers. A number of respondents indicated that they would have liked to have hired additional workers but were unable to source suitable candidates. At the UK level, only Scotland posted a stronger employment performance than Northern Ireland during the month.
Backlogs of work continued to decrease markedly at the start of the third quarter, albeit with the pace of depletion easing to a three-month low. Shipping delays, in some cases linked to geopolitical issues, contributed to a further lengthening of suppliers’ delivery times in July. Vendor performance deteriorated solidly, albeit to a lesser extent than in June.
The rate of input cost inflation continued to weaken from the recent peak seen in April, with the latest rise in input prices the slowest since February. Nonetheless, input costs continued to increase rapidly, and at a faster pace than recorded elsewhere in the UK. Panellists reported higher prices for energy, fuel and raw materials. The rate of output price inflation, meanwhile, eased to a six-month low, but charges were still raised sharply, in line with higher input costs. Here too, the increase seen in Northern Ireland was the fastest of the 12 monitored UK regions and nations.