Business activity in Northern Ireland nudged upwards in June but the expansion in the first half of the year was at a slower rate than in the British economy generally, Ulster Bank said yesterday.

While the bank's monthly purchasing managers index suggests the volume of new private sector business in June was higher than in May, firms reported pressure on their profit margins and said they secured new contracts only after they gave price discounts to customers.

"The June purchasing managers index was the best this year and it is encouraging to see that the employment reading was modestly positive in the second quarter whereas it was flat in the first quarter," said Ulster Bank chief economist Pat McArdle.

"At the same time, the margin squeeze which is causing Northern Ireland to underperform remains severe.

Input costs are easing but Northern Ireland, in common with only two other UK regions, is now reporting falls in prices charged."

The pressure on margins was recorded as backlogs of work done declined in June.

This was the fourth monthly fall this year, reflecting an increase in production capacity to cope with existing workloads and incoming new business.

Ulster Bank reported that private sector employment growth was sustained in June, the 25th monthly increase in the past 26 months.

"Although over three quarters of firms held their work forces constant during the month, the overall rate of job creation picked up slightly from May and remained marginally greater than the UK private sector average," the survey said.

It went on to say companies in Northern Ireland continue to suffer higher inflation for input products than companies in Britain.

"Though the rate of input price inflation eased for the third successive month, it remained marked, and almost five times as many panel firms reported higher average costs than those that reported lower prices than last month."