Coolling in the UK economy has spread to Northern Ireland, sparking a slowdown in the growth rate in manufacturing and services sectors, according to figures released yesterday.

The North's purchasing managers' index (PMI) dipped to 51.2 from 52.4 in December, one-fifth of a point ahead of the UK average. A reading above 50 indicates positive growth.

Although the data compare favourably with the Republic, where the monthly PMI is bubbling under the 50 threshold, they confirm that the North may be slipping towards the "soft recession" gripping much of the euro zone, analysts said.

Jitters over the prospect of war had pitched the UK economy into a period of uncertainty, said Mr Pat McArdle, chief economist at Ulster Bank.

Comparing indexes in the Republic and the North is misleading, as the former is distorted by the heavy influence of multinationals on the economy, he said. The high level of public service employment made the North more resilient to fluctuating market forces.

The labour market in the North remained marginally below the 50-point watershed in January. Of companies polled, 10 per cent said they had cut staff since December.

Inflation is also casting a shadow on the North, with the rate of price increases climbing further above the no-change mark to 62.2 from 59.9 for December, considerably higher than the UK average of 53.3. Rising oil prices were cited as the principal factor.

However, strong competition ensured that prices charged continued to slump.