BELFAST BRIEFING:Arlene Foster's upbeat assessment of the North's economy is at odds with the figures

IT MAY be time for the North's relatively new Minister for Enterprise, Trade and Investment, Arlene Foster, to get her head out of the sand.

Foster, who has been in the job less than three months, appears to be surprisingly upbeat about the prospects for the North's economy - despite a glut of gloomy new research which shows a record fall in business activity, a slump in house prices, a rise in repossessions and a massive slowdown in the construction sector.

The Minister and her officials at the Department have remained decidedly optimistic in the face of deteriorating conditions.

Last week the construction sector revealed its output had fallen by £15 million in the first quarter of 2008. In the same week the Department unveiled its latest quarterly economic review and stated that the North's economy was "reasonably well placed to weather the storm".

The Northern Ireland Quarry Products Association last week warned that the jobs of 700 people who work in the industry were currently under threat.

In the same week Foster said the local economy was "still forecast to grow in 2008". She agrees that it is "a very challenging period" for businesses.

She is very well aware of the crippling pressures that many businesses are now dealing with daily in the North, but she says she is convinced that the "strength" of the Northern Ireland labour market, coupled with increased investment in research and development, will "help many local firms retain their competitive position".

The only problem is that her optimistic approach is not shared by very many people in the North at the moment.

New research published this week suggests that the economic climate is far from improving and is actually getting worse. The latest Ulster Bank purchasing managers index, which records the level of business activity, employment and orders, shows a marked downturn in the performance of the private sector last month in the North.

The index demonstrates that business activity, new orders, backlog of work and employment levels all fell at a record rate in July. Richard Ramsey, Northern Ireland economist with Ulster Bank, said the figures show the worst decline in business trading in the report's six-year history.

According to Ramsey, July was the eighth month in a row that companies in the North reported a fall in business activity with the construction and retail sectors now the worst performing sectors in the economy.

The Ulster Bank PMI report highlights a worrying trend for Northern Ireland - as business continues to slow, the number of redundancies increase.

Evidence suggests that companies shed jobs for a fifth month in a row and according to Ulster Bank "at a marked rate". Ramsey says the North's private sector has now recorded its first 12-month decline in output. He does not believe the situation is going to improve any time soon.

"Looking ahead with new orders also plumbing new survey lows in the UK, Northern Ireland and the Republic, it may be some time before we see the green shoots of recovery in all three economies," Ramsey said.

The Ulster Bank findings will reaffirm concerns about the current health of both the retail and construction sectors - two of the biggest employers in the North.

Latest industry research shows the construction sector could be in worse shape than was first thought. The Government's own statistics garnered from a statutory survey of construction firms in the North shows construction output has fallen for the fifth consecutive quarter.

More than 700 firms take part in the survey which is an important economic indicator. The Northern Ireland Construction Bulletinfor the period January to March 2008 reveals that the value of construction output fell by £38 million compared with the corresponding period in the previous year.

The bulletin also details growing job losses taking place in the sector. In March it was estimated that more than 44,000 people were employed directly by construction-related companies.

The latest figures for self-employed construction workers suggest the sector also provides work for a further 30,000 people in the North.

According to the Construction Employers Federation, the downturn in the building sector - in both commercial and private development - means thousands of these jobs are potentially now at risk.

There are yet more depressing statistics expected to be published today in the North which will further serve to make an already nervous construction sector very uneasy. The housing survey for July of the Royal Institution of Chartered Surveyors will show a continuing low number of house sales and a fall in house prices in Northern Ireland.

Tom McClelland, the institution's Northern Ireland housing spokesman, says the North's housing market is faring marginally better in terms of price falls than some regions in the UK.

However McClelland says the difficulties first-time buyers are experiencing in obtaining mortgage finance has brought the housing market to a virtual standstill in many areas in the North.

The overwhelming evidence suggests that Northern Ireland is on the verge of one of the worst economic slowdowns in more than a decade.

The North's economy minister and her officials should not be under any illusion about how difficult the climate is for local businesses operating in these circumstances.

Being optimistic is one thing - Northern Ireland wants its economy minister to be its biggest promoter - but being realistic could be a more valuable currency in the current market.