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Causeway Chamber of Commerce
NI Economic Outlook
30th
April 2015
Richard RamseyChief Economist Northern [email protected]
www.ulstereconomix.com
@UB_Economics
Global output growth at a 6-month high in March
Global Output - PMI
35
40
45
50
55
60
65
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
Source: Markit Economics
ExpansionC
ontraction
Slide 3
Unresolved problems in the Eurozone continue to rumble on
Slide 4
Inflation no longer a problem – Disinflation / Deflation?
Annual Consumer Price Inflation (HICP)
0.0
-0.3
-4-3-2-101234567
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15
% Y/Y
EZ UK RoI US*
* US is CPI
Slide 5
Disinflation / deflation = interest rates lower for longer
UK Interest Rates (weekly)
1.41%
1.75%
0
1
2
3
4
5
6
7
8
Apr-00 Oct-02 Apr-05 Oct-07 Apr-10 Oct-12 Apr-15
%
5yr 10yr Base
Rise in swap rates preceeds base rate hikes
Source: Bloomberg
Unemployment fell to a 6-year low of 5.7% (Q4)
Employee jobs +1.9% y/y (Full-time +1.7%)
Residential property transactions +22% y/y
FTB mortgage activity at an 8-year high
Housing starts rebound from 36-year low
New car sales +9% y/y
Estimated economic growth (GVA) 2.0% (in real terms)
2014 NI economic performance highlights
Slide 7
Private sector slowdown since Q4-14 with NI’s recovery lagging behind the UK and the RoI
Private Sector Business Activity - PMIs
30
35
40
45
50
55
60
65
Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15
NI UK RoI
Source: Markit & Ulster Bank NI PMI50 = threshold between expansion / contraction
ExpansionC
ontraction
**PMI Surveys Exclude Agriculture & Public Sector**
Slide 8
NI & Scotland lagging behind the other UK regions
Output / Business Activity Q1 2015
50 = No change
60.2
49
57.5
40
45
50
55
60
65
Lon WM Wal UK SE Y&H SW NW East EM NE Scot NI RoI
PMI Index
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
Slide 9
Growth rates in new business & job creation have eased
NI Private Sector ActivityMonthly
30
35
40
45
50
55
60
65
70
Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15
New Business Employment
Source: Markit Economics & Ulster Bank NI PMI
ExpansionC
ontraction
Slide 10
NI firms reporting disinflation in costs but deflation with prices
NI Private Sector Profit Squeeze3 Month Moving Average
30
40
50
60
70
80
Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15
Output Prices Input Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
Price of goods & services
Slide 11
Slowdown has been evident across all sectors
Northern Ireland Private Sector Output 3 month moving average
30
35
40
45
50
55
60
65
70
Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15
Manufacturing Services Construction
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
Construction sector turning the corner in terms of output…
Northern Ireland Construction Output
43% below peak
60
80
100
120
140
160
180
2000 Q4 2004 Q2 2007 Q4 2011 Q2 2014 Q4
Index 2011 = 100
Source: DFP Construction Bulletin
…but not in terms of employment
NI Sector Recoveries in Employee JobsPre-Recession Peaks Indexed = 100
1% above peak
5% below peak
37% below peak
50
60
70
80
90
100
110
Peak 1 year 2yrs 3yrs 4yrs 5yrs 6yrs 7yrsTime Since Pre-Recession Peak
Index
Total Services ManufacturingConstruction Pre-Recession Peak
Source: DFP & UB Calculations
Jobs recovery continues - 70% of jobs lost (+28k) recouped in < 3yrs
Annual Growth in N.Ireland Employee Jobs
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
%
FT PT Total
Source: ONS & DFP
Slide 15
Claimant count has fallen for 27 months in a row
NI Unemployment Claimant Count Levels
45,200
123,100
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Mar-71 Jul-78 Nov-85 Mar-93 Jul-00 Nov-07 Mar-15
Source: DFP
Dec 2012 64,800
Record Low Aug 07 23,500
Good Friday Agreement
signed April 199857,900
Slide 16
Unemployment recently hit a 6-year low
Unemployment Rate
5.6
10.1
6.0
0
2
4
6
8
10
12
14
16
Feb-97 Feb-00 Feb-03 Feb-06 Feb-09 Feb-12 Feb-15
%
UK RoI NI
Source: ONS ILO Unemployment Rate & RoI Live Register
Youth unemployment still stubbornly high
Youth Unemployment Rate (18-24yrs)
0%
5%
10%
15%
20%
25%
30%
Feb-95 Feb-99 Feb-03 Feb-07 Feb-11 Feb-15
%
Source: ONS LFS
GFA signed
Younger generation haven’t experienced the jobs recovery that older generations have
NI Employment Change by Age
-30%
-20%
-10%
0%
10%
20%
30%
40%
18-24yrs 25-49yrs >50yrs
% Y/Y 7-year % Change
Source: LFS February - April 2015
Slide 19
The younger generation has experienced the sharpest decline in earnings
% Change in N.Ireland Median Annual Earnings Cumulative change in real terms 2008-2014*
-13.7%
-9.1%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
Age 18-21 Age 22-29 Age 30-39 Age 40-49 Age 50-59 Age 60+ All
All Employees (Full-Time & Part-Time) Full-Time
Source: DFP ASHE & ONS, * April each year
Slide 20
Driving test downturn appears to have turned a corner
N.Ireland Private Car Driving Tests Conducted
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: DVA
Slide 21
New car sales growth stutters following 2 years of growth
N.Ireland New Car Registrations Annual % Growth
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2007 2008 2009 2010 2011 2012 2013 2014 2015*
Y/Y
VAT cut to 15% & 'Cash for Clunkers'
Source: SMMT, *Figures for Q1 2015
Cost of living crisis narrative has disappeared …for now at least
UK Average Weekly Earnings* & CPI InflationAnnual % Change
0
1
2
3
4
5
6
Mar-02 May-04 Jul-06 Sep-08 Nov-10 Jan-13 Mar-15
%
Average Weekly Earnings CPI Inflation MPC Target
Income squeeze'NICE'
Decade
Source: ONS * Excluding bonuses
Slide 23
Food & petrol prices falling at a record rate
UK Food Price Inflation (CPI)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
*
Y/Y
Source: ONS, * March 2015
Slide 24
Energy & petrol prices falling too
UK Energy & Fuel (CPI)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
*
Y/Y
Electricity Gas & Other Fuels Transport Fuels & Lubricants
Source: ONS, * March 2015
Slide 25
Until recently petrol prices have been falling too
UK Fuel Prices - Pence per litre (Weekly)
113pApr-15
106.3pFeb-15
131.1pJul-14
129.7p
141.8p Apr-12
85.4p
60
70
80
90
100
110
120
130
140
150
Apr-04 Feb-06 Dec-07 Oct-09 Aug-11 Jun-13 Apr-15
Pence per litre
Source: DECC
Slide 26
House prices have been on the rise – up 8% y/y in Q4 2014
NI Residential Property Price IndexQuarterly & Year-on-Year Growth Rates
-15%
-10%
-5%
0%
5%
10%
15%
2005 Q4 2007 Q2 2008 Q4 2010 Q2 2011 Q4 2013 Q2 2014 Q4
Q/Q
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Y/Y
Q/Q Left Hand Axis Y/Y Right Hand Axis
Source: DFP RPPI
Slide 27
Housing starts up 14% y/y but coming off a 35 year low
Northern Ireland Housing Starts
0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
Source: DSD & DFP
36-yr low
NI exports more price competitive in US market vis-à-vis last year
Sterling / Dollar Exchange Rate
1.546
1.46
1.71
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2
2.1
Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Source: Bloomberg
Sterling hits a 7-yr high against the euro
Sterling / Euro Exchange Rate Hits a 7-yr High
1.42
1.0
1.1
1.2
1.3
1.4
1.5
1.6
Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
€
Source: Bloomberg
Slide 30
Exports – the smaller the firm the bigger the exposure to the Eurozone
NI Manufacturing Sales made to each destination 2013/14
54.1%
6.0%
44.0%
17.7%
14.8%
4.0%
15.9%
18.8%
30.1%
58.1%
25.5%
5.0%10.1%
8.2%
8.0%
4.4% 8.1%
23.7%
6.6%
36.9%
0%
20%
40%
60%
80%
100%
Small Medium Large SMEs
NI RoI GB Rest of EU RoW
Island of Ireland
Exposure71.8%
Island of Ireland
Exposure51.7% Island of
IrelandExposure
10.0%
Island of Ireland
Exposure59.9%
Exchange rate now a headwind for retail too
Northern Ireland PMI
20
30
40
50
60
70
Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15
Retail Activity Export Orders (All Sectors) No Change
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
NI economy faces significant challenges
Source: The Independent 4th December 2014
GE a speed camera for pace of austerity
Slide 34
Plenty of scope for political surprises in 2015
Source:
The Economist
Brexit£ / €
Corp Tax Rate
Up or down?
35
Economist update – Republic of Ireland & Northern Ireland – April 2015
GDP Growth y/y %
Personal Consumption y/y
%
House Price Growth y/y %
Unemployment Rate, % of the Labour Force
Employment Growth y/y %
Construction PMI HICP Inflation y/y %
2013 0.2 -0.8 2.1 13.1 2.4 49.3* 0.52014 4.8 1.2 12.9 11.3 1.8 61.1* 0.32015f 3.9 2.4 9.7 9.8 2.1 52.9** 0.22016f 3.6 2.3 5.3 8.9 2.2 1.5
Republic of Ireland
Northern Ireland
GVA Growth y/y %
House Price Growth y/y %
Unemployment Rate, % of the Labour Force
Employment Growth y/y %
Construction PMI HICP Inflation y/y %
2013 -0.2 -2.4 7.6 1.2 53.4* 2.02014 2.0 7.3 6.4 1.9 57.3* 0.52015f 1.8 8.0 6.0 1.1 50.2** 0.22016f 1.1 5.0 6.2 0.5 1.2
Note: Figures above relate to the average annual percentage change unless stated otherwise* Average Construction PMI Headline Activity reading for the year ** Latest Construction PMI Headline Activity reading for March 2015
Note: Figures above relate to the average annual percentage change GVA growth for 2014 is an estimate* Average NI PMI Headline Activity reading for the year* Latest NI PMI Headline Activity reading for March 2015
Slide 36Slide 36
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Twitter: @UB_Economics
Slide 37
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