The nearest thing Northern Ireland has to GDP (or official economic growth) figures was released today. The Northern Ireland Composite Economic Index (NICEI), revealed a 0.1% quarterly fall in Q3 with output up by a pedestrian 0.3% over the year. These figures conceal contrasting performance between the public and private sectors. The public sector component of the composite index, which is based on jobs, posted a 0.4% rise in Q3 – its fourth consecutive quarterly gain – and a 1.4% y/y increase. Following a decade of austerity, public sector employment is growing at its fastest pace since the last recession.
While the public sector is in expansion mode, conditions within the private sector have been deteriorating. Performance over the period Q2 2018 to Q2 2019 was flattered by stockpiling effects (in the manufacturing sector) in the run-up to the first Brexit deadline in March 2019. Today’s release reveals a 0.3% q/q fall in private sector output. This wipes out the (stockpile-induced)growth in the first half of 2019. Private sector output in Q3 2019 was flat relative to the corresponding period last year. The contraction in Q3 came as no surprise and had been flagged earlier in other surveys – e.g. the Ulster Bank PMI and the NI Chamber of Commerce and BDO Quarterly Economic Survey. The latter both recently signalled that we can expect a further contraction in private sector output in Q4. This will take the rolling annual average growth rate for the composite index (public and private sectors) and the private sector index below 1%. Both indices stood at 1.0% for the four quarters to Q3 2019.
Some twelve years after Northern Ireland’s private sector output peak (Q2 2007), it is noted that the private sector has recovered just three-quarters of the output lost during the recession. Private sector output is still 3.3% below where it was over twelve years ago. This is despite a 15% increase in the number of private sector jobs (+73.4k). The latter highlights Northern Ireland’s persistent productivity problem with a significant proportion of jobs created concentrated in low wage occupations.
Overall, 2019 was a turning point for Northern Ireland’s private sector with business conditions deteriorating after a strong start. Following five years of annual growth (2014-2018), Northern Ireland’s private sector has hit another downturn. It appears the Northern Ireland economy has ended the decade the way it began. 2020 is set to be a challenging year with Brexit remaining a work in progress. Perhaps the one bright spot concerns the public sector. The return of the Stormont Executive will help address the logjam in decision making that has built up over the last three years. The £2bn of public spending contained within the latest financial package will certainly help. But it is clear, as far as economic growth is concerned, the Northern Ireland economy appears stuck in the crawler lane. Whether it nudges forward (marginal growth of <1% y/y) or backwards (economic contraction) remains to be seen.