The construction and retail sectors drove an overall decline in business activity in Northern Ireland last month, a report said yesterday.
But the Ulster Bank Regional Growth Tracker said manufacturing and services were driving economic growth and job creation.
And employment growth, while slight, had continued during January, with increasing in staffing levels now entering its third year.
However, the headline business activity index was still below the 50 ‘no change’ mark, and had dropped to 45 from 47.7 in December — the steepest decline in two years.
Sebastian Burnside, chief economist at Ulster Bank parent company NatWest, said: “NIs labour market is the most resilient of any part of the UK at the start of 2025.
“That’s building on the momentum of last year, when job growth was twice the pace of the next fastest region. But employers are starting the year in a more cautious setting.
“Private sector firms reported rapidly rising cost pressures and prices.
“Combined with rising wage costs and upcoming increases to national insurance contributions, this has cooled demand and the flow of new work.
“Many will be hoping that the Bank of England’s interest rate cut last week means that policy is now less restrictive, with further loosening expected in the year ahead.”
The Bank of England slashed the base rate of interest to 4.5% last week. However, businesses are bracing themselves for the impact of a rise in employer national insurance contributions from April, when the rate will go up from 13.8% to 15%.
Ulster Bank said new orders at Northern Ireland companies decreased for the third consecutive month in January.
Confidence in the year-ahead outlook for business activity dropped sharply in January and was the lowest in just over two years. Plans to launch new products and hopes that new orders and market share will grow supported optimism in the outlook.
However, that was curtailed by concerns around wider economic conditions, a lack of confidence among customers and the forthcoming rise in employer national insurance contributions.
Although staffing levels increased for the 25th consecutive month during January, the rate of job creation was only marginal and the weakest in the current growth sequence.
Rising wage pressures were the main factor behind an increase in input prices in January, according to respondents. The rate of input cost inflation accelerated and was the fastest since March 2023. The latest increase was also sharper than the series average.
Rising staff costs were often passed through to customers, resulting in a further increase in prices charged by NI companies. Selling prices rose markedly, and at a slightly faster pace than in December.
Many UK company bosses have been speaking out against the increase in national insurance. Writing in the Sunday Times, M&S chief executive Stuart Machin said: “Retail is being raided like a piggy bank and it’s unacceptable.”