- By John Campbell
- ` News NI Business and Economics Editor
57 minutes ago
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Chancellor Jeremy Hunt announced his budget on Wednesday
In her budget speech on Wednesday, the Chancellor was pleased to announce that the UK is unlikely to fall back into a technical recession this year.
But Northern Ireland did enter a technical recession in the third quarter of last year.
That means there were two consecutive quarters of falling economic output.
Northern Ireland’s official economic statistics showed production fell by 0.1% in the second quarter of 2022 and by 0.3% in the third quarter.
But this week there was some hope that the downturn could be relatively short and shallow.
First, we got the same numbers for the last quarter of 2022.
They suggest that the service sector, by far the largest part of the economy, ended the year strong.
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The service sector in Northern Ireland had a strong end to 2022
Production showed a 1% quarterly increase, a much better performance than the second and third quarters.
Retail sales figures suggest shops had a decent Christmas, while business services and financial sector performance hit record highs.
The broad manufacturing sector, which includes manufacturing, utilities and quarries, did not fare as well with production down 0.6% in the quarter.
A more in-depth analysis shows that most of this fall in production was due to weaker performance in the power and gas sectors, but that may just be a reflection of energy prices falling from record highs.
The two main manufacturing subsectors, machinery and food, both had good quarters.
It is not yet clear whether this stronger performance by some parts of manufacturing and services will be enough for a return to growth overall.
The final analysis, which we will see later this month, must also take into account the development of the public sector and the construction industry.
Job data positive
The second glimmer of hope this week was continued strength in the jobs market.
Most economic forecasts for Northern Ireland suggest that unemployment will start to rise as the cost of living crisis continues to hurt consumer demand and then corporate profits.
But there’s no real sign of that happening yet.
In fact, the unemployment rate in Northern Ireland fell to just 2.4% in January, the lowest since the pandemic.
Almost all other employment data was also positive – the employment rate rose, unemployment fell and layoffs remain well below the long-term trend.
The latest glimmer of hope came in Ulster Bank’s monthly business survey, known as the Purchasing Managers’ Index (PMI).
It’s not an official stat, but usually a pretty good guide to where the official stats are going.
Companies surveyed in February reported the first increase in production and new orders in 10 months, while business sentiment hit the highest level since the Russian invasion of Ukraine.
But we’re not over the hill yet. For example, the housing market in Northern Ireland has yet to fully absorb the impact of rising interest rates.
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Changes in the housing market could also affect legal and real estate agencies
A cooling housing market isn’t just an issue for construction; it will also affect professional services such as lawyers and real estate agencies.
It is also important to come back to the forecast that enabled the Chancellor to say that a UK recession is no longer expected.
It is drawn up by the Office for Budget Responsibility (OBR) and published together with the budget.
It suggested that people in the UK are facing the biggest drop in purchasing power in 70 years as the rising cost of living continues to weigh on wages.
The OBR said that once rising prices are factored in, household incomes would fall by 6% this year and next, and living standards would not recover to pre-pandemic levels until 2027.
Even if Northern Ireland emerges from recession soon, it won’t feel that way for many households.
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