Cliff edges rounded but hard landing beckons

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Fears of a ‘cliff edge’ end to the furlough scheme were always overdone.  Rishi “whatever it takes” Sunak was always going to do more. Treasury watchers have noted that the Chancellor, who has only been in post for seven months, has a proven track record of letting his actions speak louder than his words. He is an active interventionist Chancellor who has demonstrated an ability to adapt and provide more support as and when required. Another round of support measures / fiscal stimulus was due this autumn. With the pandemic rearing its head again, the associated deterioration in the economic outlook brought measures forward by a number of weeks. Today’s Winter Economy Plan is further evidence of a Chancellor who under-promises and overdelivers. Sunak unveiled a package of measures including a wage support scheme, an extension to the VAT cut for hospitality and tourism, and measures in relation to government loan schemes.

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Rock bottom: official stats finally reveal impact on NI economy

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Official statistics have finally revealed the scale of the much talked about economic impact on two key parts of the Northern Ireland economy. Following news earlier in the week that Northern Ireland posted its first quarterly decline in employee jobs in four-and-a-half years, figures today show a staggering slump in output. Both the Index of Services and Index of Production posted record rates of decline. Like a game of snakes and ladders, the COVID-19 pandemic has acted as a big snake taking industrial and services output back to square one or new series lows.

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Tipping point for the NI labour market?

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Resilience in the face of recession – Throughout the pandemic many key labour market indicators have not been sending out distress signals.  For example, the number of employee jobs in Q1 was a record high and unemployment remained close to its all-time low. That doesn’t sound like an economy in the midst of its deepest recession on record. Unprecedented levels of support, not least from the Job Retention Scheme, have prevented employment falling off a cliff. A range of interventions have meant that while the UK economy experienced one of the sharpest declines in output (GDP) of any economy in Europe, employment within the UK has (for now) held up better than almost all of its former EU counterparts. Incidentally, the Republic of Ireland is at the other end of the league table for both measures – i.e. the RoI has experienced one of the shallowest recessions in terms of GDP but one of the deepest declines in employment within the EU.

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Activity increases, but new orders take a step back

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Today sees the release of August data from the Ulster Bank Northern Ireland PMI. The latest report – produced for Ulster Bank by IHS Markit – indicated that although business activity increased for the second month running, the rate of expansion softened amid signs of a stalling in the recovery in new orders. There remained further evidence of spare capacity, which led to a sharper reduction in employment. The rate of cost inflation quickened, but firms lowered their selling prices to try and attract new business.

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Will pandemic kickstart young people into becoming more politically engaged?

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The Kickstart Scheme has been one of the UK government’s flagship recovery policies to assist young people who are the age-group most economically impacted by COVID-19. The scheme is designed to encourage job placements for 16-24-year-olds in England, Scotland and Wales by providing grants to employers. Like many of these policies, the small print says that it excludes Northern Ireland; however NI Economy Minster Diane Dodds has since responded with a locally focused initiative.

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Chief Economist’s Weekly Brief – Back again?

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Staging a retreat from outsized policy stimulus was never going to be straightforward. Indeed in many countries the trend is in the other direction. The French government has announced a €100bn stimulus plan, while its Spanish and German counterparts look set to extend their furlough schemes. Might the UK recovery need a bit of a helping hand, too in the coming months?

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New car sales recovery continues

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Local showrooms enjoyed their second lockdown-free month with new car sales picking-up for the second month in a row. Dealers sold 3,618 new cars in August which marked a rise of almost 7% y/y. While last month’s figures was up on last year, they were below the August sales volumes in the previous six years. Clearly there remains an element of pent-up demand in the latest figures which follow the best July in 13 years. Back in July new car sales increased by 17% y/y. Following the lockdown from late-March to early June a few months of outperformance were expected. It will take another few months of figures to get a better handle on the true underlying picture.

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