An unexpected decline in April GDP, driven by sharply weaker manufacturing activity, has increased the risks of UK growth stagnating, or even contracting, in Q2 2019. Still, continued favourable labour market conditions remain a key support for the resilient consumer, lessening the risks of a more pronounced downturn.
A weaker than expected US employment report is adding to rising concerns about the global economy, fuelling expectations that the Federal Reserve will cut rates soon, possibly this summer. ECB president Draghi signalled the door is open for further monetary measures to support the weak Euro area economy, if needed.
Today sees the release of May data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – indicated that the Northern Ireland private sector remained in contraction territory. Activity and new business continued to fall markedly, often linked to Brexit uncertainty. In turn, companies lowered their staffing levels again. There was some relief on the price front, as the rate of input cost inflation eased. That said, the extent of input price increases far outweighed that of selling charges again during the month.
About this time last year, the price of beer in Belfast’s now iconic Grand Central Hotel caused much reaction, with its Observatory Bar selling a pint for £8. Clearly, this is a niche indicator, but it led to questions by some observers in relation to what this said about the local economy, the strength of the tourism sector, and the spending power of local consumers.
Global trade tensions are ratcheting up. Whilst the US and China trade blows President Trump warned of a 5% increase in tariffs on Mexican imports, rising 5% a month up to a maximum 25% in October. Meanwhile China’s manufacturing PMI came in a little soft. But tariffs can only partly be blamed there.
The resignation of UK PM Theresa May has prompted a flurry of contenders for the Tory leadership – the contest officially begins June 10th with the victor likely announced by the end of July. Boris Johnson is the bookies’ early favourite, fanning fears about a possible no-deal Brexit. The strong showing of the Brexit party in EU highlights increased fragmentation in UK politics. Meanwhile, latest UK data shows consumers continue to open their wallets.
Despite some notable examples of excellent practice, Northern Ireland’s voluntary sector overall is lagging behind in terms of digital transformation and this is impacting on its ability to remain competitive and deliver services.
Northern Ireland Residential Property Price Index Comment
Northern Ireland’s housing market has been a source of continued positivity in recent years, with housebuilding, prices, transactions and mortgage activity all at multi-year highs. Though the property market remains in recovery mode, rather than recovered, following the biggest residential property downturn in UK history.
Residential property price growth has been slowing in both the UK and Republic of Ireland markets. The latest Residential Property Price Index for Northern Ireland points to a similar trend. Residential property prices posted their first quarterly fall in two years in Q1 2019 with a 1.0% decline. Annual house price growth eased from 5.1% in Q4 2018 to a more sustainable 3.5% in Q1 2019 – a rate that remains above consumer price inflation and broadly in line with average earnings growth. Lower rates of house price inflation (2-3% p.a.) are to be welcomed.
The UK labour market remains in rude health, a key support for the household sector. In contrast, US and Chinese retail sales disappointed. Meanwhile, German growth rebounded in early 2019 but the economy remains fragile.
When analysing economies the world over, the unemployment rate is arguably one of the most important go-to statistics. It enables comparisons to be drawn and inferences made on the relative health of different economies. Today’s labour market statistics revealed that Northern Ireland’s headline unemployment rate fell to a jaw-dropping low of 2.9% in Q1 2019. This represents the lowest unemployment rate on record and the joint-second lowest of all the UK regions. Not only does it compare favourably with the UK (3.8%), but it is also below the likes of the United States (3.6%), the Republic of Ireland (5.4%) and Germany (3.2%). Japan is one of the few world economies with a lower unemployment rate (2.5%) than Northern Ireland.