Record inflation has taken its toll on the Northern Ireland economy and caused a fall in demand last month, according to a survey by Ulster Bank.

Every month it asks firms about things like staffing levels, new orders and exports.

The survey is considered a reliable indicator of economic performance.

In July, business activity in Northern Ireland fell at the fastest rate since February 2021, with a drop in both output and new orders.

Outside of the Covid pandemic and lockdown restrictions, it was the sharpest contraction since November 2012.

The drop in demand was seen across all sectors of the economy but was most marked in retail.

‘Employment a bright spot’

Richard Ramsey, Ulster Bank’s chief economist in Northern Ireland, said: “Perhaps unsurprisingly, given the cost-of-living crisis, retail recorded the steepest declines in sales and orders.

“Retail sales have plunged over the last three months and retailers expect sales to be broadly unchanged in 12 months’ time.”

The only positive in the survey was that firms were still taking on more staff.

Mr Ramsey added: “Employment continues to be a bright spot with all four sectors increasing their staffing levels in July.

“But with the Bank of England forecasting a UK recession, a softening in the labour market will be expected going into 2023.

“That said, the labour market is likely to be much more robust this time than in previous recessions.”