Companies in the north are ramping up staffing levels to an extent unseen for nearly 17 years.
That’s according to Ulster Bank’s closely-watched purchasing managers’ index (PMI), which every month tracks firms’ performance in four sectors (manufacturing, construction, retail and services).
It showed the region’s private sector ended the second quarter of the year comfortably in growth territory, with July showing a further solid expansion of business activity.
But according to Ulster Bank’s chief economist Richard Ramsey, it was the job creation which was most eye-catching, with widespread increases in employment as companies responded to greater workloads.
“Service providers ramped up their staff numbers to levels we haven’t seen since in almost 17 years, stretching back to 2007,” he said.
“Companies across the private sector saw outstanding business expansion again, suggesting that employment and output will need to be raised further in the months ahead to try and keep on top of workloads.
“And while nothing should be taken for granted, everything seems set up for firms to have a successful second half of 2024,” he added.
Overall in the latest PMI, new orders were up markedly, while rates of inflation showed signs of easing.
Indeed the expansion in output in Northern Ireland was the sharpest of the 12 UK regions covered by the PMI report, which was linked to higher new orders in three of the four monitored sectors (construction was the exception).
New business increased for the seventh consecutive month and at a pace that was stronger than the UK average.
Companies expect continued increases in new orders over the coming year to support growth of output.
As a result, business sentiment remained elevated, with almost 38% of respondents predicting a rise in activity over the next 12 months.
Marked increases in new orders led companies to expand employment for the 19th month running in July, with the overall rate of job creation its most marked since April 2023.
But despite the expansion in operating capacity, the strength of new order growth meant that backlogs of work continued to build at the start of the third quarter.
Mr Ramsey said: “The Northern Ireland private sector started the second half of the year in a similar vein to how it ended the first, with marked improvements in output and new orders. In fact, the expansion in business activity in Northern Ireland was the strongest of all the UK regions and nations covered by the report.
“Delving into the different sectors, however, shows that the picture isn’t overwhelmingly positive.
“Growth was driven by the manufacturing and services categories, but the retail and construction sectors were less buoyant.”
The latest PMI findings come amidst that inflation could rise again soon, despite the main measure falling to the Bank of England’s 2% target earlier this year.
Catherine Mann, an external member of the Bank’s Monetary Policy Committee (MPC), said the UK should not be “seduced” into thinking inflation will stay low over the coming year, and pointed to evidence that suggests companies expect to increase wages and prices.
She said that indicates that she and other rate setters are “looking at a problem for next year.”
At the start of August, the Bank cut the base interest rate by a quarter point to 5% after a year of high rates designed to curb inflation.
But it signalled a cautious tone on further cuts, and many economists believe rates will be kept unchanged when the committee next meets in September.
Ms Mann, a former OECD chief economist, was one of four policy-makers who voted to leave rates unchanged at the last meeting, at 5.25%, a 16-year high.
“Inflation has come down, but we shouldn’t be seduced by headline inflation because of the role of energy and external aspects working through,” she said.
