Firms in Northern Ireland saw order books shrink for the second month in a row during August despite a jump in export business due to sterling’s weakness, according to new figures.

The latest Ulster Bank Northern Ireland purchasing managers’ index shows the North’s private sector enjoyed a return to growth last month and continued to create jobs but at the weakest rate recorded this year and below the pre-downturn, long-term average.

Growth

It was also less pronounced than the rate of growth witnessed during August across the UK, where companies reported a rise in new orders.

Although the manufacturing and retail sectors expanded last month in Northern Ireland, the services and construction sectors reported declines in new business.

Ulster Bank's chief economist in Northern Ireland, Richard Ramsey, said notable weaknesses lay behind the apparent return to growth and ongoing job creation in the North.

“In particular, the two growing concerns are the surge in inflationary pressures and stagnation within the local services sector.

“Overall, the rebound in private-sector activity is largely due to the manufacturing and retail sectors. Indeed, the former recorded the fastest rate of growth in output and new orders last month of all the sectors.”

Employment

He added: “Meanwhile, the fastest rates of employment growth remain within the retail sector. Clearly the manufacturing and retail sectors (cross-Border shopping/tourism) are benefiting from the marked depreciation in sterling that has occurred in recent months. This has enhanced price competitiveness and boosted demand from outside the UK.”

He warned that the weakness in sterling was “a double-edged sword”.

“Inflationary pressures are accelerating, with input costs rising last month at their fastest rate since November 2011. Input cost inflation amongst retailers and manufacturers reached 54-month and 64-month highs respectively in August.

“Manufacturers and retailers have responded by raising the prices of their goods. Indeed, manufacturing firms increased their prices at the fastest rate since the survey began,” Mr Ramsey added.