As expected the BoE kept its powder dry following August’s rate hike. Meanwhile, the ECB remains on course to halt QE by year-end but tame inflation suggests a rate hike is some way off. In contrast, the Fed looks odds on to tighten policy further later this month.
Record highs and lows but increasing productivity remains the Holy Grail
Following on from the labour market data dump earlier in the week, today saw the release of two output surveys – the Index of Production (mostly manufacturing) and the Index of Services (refers to private sector services only). Both of these surveys posted healthy rates of growth rates in Q2 2018. Furthermore, there were upward revisions to the first quarter figures. The upshot of this is the Northern Ireland economy has had a strong start to the year and indeed stronger than previously thought. The Northern Ireland Composite Economic Index for Q2 2018 will be released on 11th October alongside the Index of Construction and is set to record a robust rate of growth in Q2.
Labour market records continue to tumble
Today saw a data dump of labour market statistics which revealed more record highs and lows of the positive variety.
Chief Economist’s Weekly Brief – Chalk and cheese
The US economy is humming and wage pressures are building, keeping the Fed on track for another modest tightening in September. UK growth, however, remains lacklustre with manufacturing in the doldrums. A BoE rate hike appears a distant prospect.
New orders rise at weakest pace in four months
Today sees the release of August data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – signalled a loss of growth momentum in the Northern Ireland private sector. Although output and new orders continued to rise solidly, rates of expansion in both were weaker than recorded in July. That said, the rate of job creation picked up, as did business confidence. Inflation of both input costs and output prices eased, but remained elevated.
Consumer confidence still lacking in car market
Northern Ireland recruitment agencies may be capitalising on strong demand within a buoyant labour market, but , conversely, local car dealers continue to experience tough trading conditions with consumer demand for a new set of wheels remaining lacklustre. August saw some improvement, albeit marginal, with new car sales 1.5% higher than the same period last year. There were 3,701 new cars sold last month, some 54 higher than last August’s figure. However, the latter represented a five-year low so the latest improvement must be set within that context.
Chief Economist’s Weekly Brief – Autumn challenges
A fresh Parliamentary term but the top agenda item is most definitely familiar. Brexit will again be all-consuming in the coming months, and far beyond.
Chief Economist’s Weekly Brief – Good UK fiscal news
The UK’s encouraging fiscal position provides Chancellor Hammond with more room for manoeuvre in his upcoming autumn statement.
Bank of Mum & Dad funding housing market recovery
The latest set of mortgage statistics from UK Finance reveal further signs of buoyancy in the Northern Ireland housing market.
The first-time buyer market continues to post double-digit growth year-on-year. 2,700 new home-owners took out a mortgage in Q2 2018, that’s up 12.5% y/y and the highest figure since Q4 2005. Meanwhile the size of the loan advanced to new home-purchasers hit £100,000 for the first time.
Significant deposits remain a feature of the mortgage market for first-time buyers. The median deposit for both NI & UK first-time buyers currently stands at £17,000. That equates to three-quarters of the median annual salary of a full-time Northern Ireland employee aged 25-34 years of age. Few thirty year olds (the average age of a first-time buyer) can avail of this sort of cash without assistance from the so-called Bank of Mum & Dad / Bank of Grandmum & Grandad.
Unlike the first-time buyer market, growth in the home mover market remains lacklustre. The legacy of negative equity and little or no equity continue to act as a drag on this area of the market.
Only 1,600 loans were advanced for people moving house in Northern Ireland during Q2 2018. This represented a rise of 7% y/y but compares with a quarterly average of 4,000 for the decade 1997-2006.
Remortgage activity, which accounts for one-third of mortgage activity, has also been on the rise. The number of loans remained flat at an eight-and-a-half year high of 2,300 in Q2 2018. This represented a rise of 10% y/y but is still only one-third of the volume of remortgage activity that occurred between 2005-2008.
Overall, activity in Northern Ireland’s mortgage market continues to recover from the biggest property downturn in UK history. The first-time buyer market is driving this growth which in turn is being supported by individuals with access to sizeable deposits.
As far as deposits are concerned, the would-be first-time buyer market is being split into haves and have nots. For an increasing number of aspirational home-owners, saving for a deposit is particularly challenging within the context of ongoing house price growth, strong rent inflation, modest wage growth and rising utility bills.
Pricing Status? It’s complicated
To listen to consumers and the media, you would think that price is all that matters. Whether it’s house prices, holidays, the latest bargains, mobile phone contracts or even the price of a pint of beer, all people seem to focus on is the cost. And in many cases, price is indeed key. Think back to when chocolate bar companies shrunk their products rather than raise their prices, or how big a deal some retailers make out of their Boxing Day Sales and Black Friday deals. However, price isn’t always all that matters for consumers. Price, and what we’re prepared to pay, it turns out, is a complex thing.
