This will go down as the weirdest recession yet

If someone had told us a year ago that we were going to go through the deepest recession in a century and end up with an unemployment rate of just 3.7%, this probably would have been considered absurd. Logic would dictate that a double-digit contraction in economic output would create a double-digit unemployment figure. But there has been little logical about the past year – as the Sunday Times columnist David Smith succinctly described it, it has been “the deepest recession, but also easily the weirdest”.

Continue reading

3,2,1…Bungee!

As far as economic output is concerned, 2020 has been a year of extremes. Record rates of decline in Q2 followed by record rates of expansion in Q3. Lockdown restrictions have had the effect of turning economic activity off and on. However, as the pandemic has progressed, subsequent lockdowns have been less severe on economic activity than the first. Many businesses have been able to adapt and function throughout lockdowns or pivot into new markets. The trajectory of economic output has largely followed a bungee jump. The initial fall and rebound will be the most extreme, but subsequent declines and rebounds will moderate. Not surprisingly, the latest Industrial Production and Index of Services (private sector only) from NISRA revealed further declines in output in Q4 2020. These two indices account for the vast majority of Northern Ireland’s Composite Economic Index. Given the scale of the declines revealed today, it is inevitable that the Composite Economic Index (a proxy for GDP), when published next month, will post a sizeable contraction.

Continue reading

Construction industry experiencing a supply-chain reaction

The local construction industry rebounded in the second half of last year and recovered much of the turnover lost due to lockdown restrictions. That’s according to the latest Construction Employers’ Federation State of Trade Survey for H2 2020. Two-thirds of turnover for last year occurred in H2. However, despite the rebound, average turnover was still down 20-25% on 2019.

Continue reading

Labour market recovery or false dawn?

Northern Ireland’s latest labour market statistics smack of ‘nothing to see here…just move along’. Other than the record number of redundancies proposed in 2020 (11,000), there are few signs that the economy is in the midst of an economic crisis. Indeed, many of the indicators point to an improvement. For example, the unemployment rate and the number of individuals claiming unemployment related benefits is falling. Meanwhile the total hours worked and the number of employees on payrolls continued their upward trends. Talk of a labour market recovery, however, is premature. The Chancellor recently stated that the economy is going to get worse before it gets better. Similarly, the labour market will deteriorate before a sustainable recovery takes hold. Unprecedented employment support measures, such as the Job Retention Scheme (JRS) and the Self-Employment Income Support Scheme (SEISS), largely inoculated the UK and NI economies against a severe labour market shock. But once these measures are withdrawn a surge in unemployment in the second half of the year is inevitable.

Continue reading

The year of pent-up demand and pent-up problems

January 2021 represents more than just the start of a new year. It marks the new post Brexit-era, and it brings us a step closer to a post-Covid era with the ramping up of the vaccine roll out. In some respects, this month therefore marks a turning point for Northern Ireland and our economy, and a time when we should really take stock of where we are and where we are going in the future. 

Continue reading

Economy to grow 5% in 2021 but recovery will be a squashed W

Record rebound – Northern Ireland’s economy witnessed a record rate of expansion during the third quarter with output rising by 15.5% q/q. That is according to NI’s Composite Economic Index (NICEI) which is the closest statistic to GDP that we have. Q3’s record rebound followed four successive quarters of contraction and a record rate of decline of 13.7% q/q in Q2. The pandemic has necessitated the introduction of lockdowns which switched off large parts of economic activity.  Conversely, the lifting of restrictions in Q3 led to a reopening of the economy and a subsequent surge in economic activity. 

Continue reading

Biggest drop in new car sales since WW2

Biggest annual decline in peacetime – 2020 has been a year of record rates of decline on a number fronts, not least within the car industry. Brexit and lockdowns were two headwinds for the sector that dampened demand. New UK car sales slumped by 29% last year which represented the steepest annual fall since World War II (1943) with sales volumes plumbing their lowest level since 1992.  2020 marked the fourth consecutive year of declining car sales in the UK with a cumulative decline of 40% (1.1 million cars) since 2016’s peak. Electric vehicle sales have been one bright spot at the expense of petrol and diesel engine vehicles. Battery electric vehicles and plug-in hybrid electric vehicles saw sales soar by 186% and 91% respectively last year. As a result, electric vehicles now account for 1 in 10 of all new car sales, up from 1 in 30 in 2019.

Continue reading

What goes down must go up!

2020 has been the year of the unprecedented rate of decline. New car sales, property transactions, housebuilding, manufacturing output, services activity or tourist numbers have all plunged on a scale that we have never seen before. Lockdown restrictions have been responsible for this ‘switching off’ of economic activity and this was most pronounced in the second quarter. When swathes of the economy are shutdown, the inevitable consequence of the subsequent lifting of restrictions means output / activity can go only one way – UP!

Continue reading

Green light at the end of the tunnel?

You could say that the less said about 2020 the better. But even when we look forward to 2021, in some respects, it’s 2020 all over again. This time last year, we were looking forward to the Olympics and Euro 2020. Once again this year, we’re looking forward to the Olympics and the Euro 2020. But that said, in 2021 there are going to be a whole series of new trends that impact upon economies, countries and businesses. So, what are they?

Continue reading