The latest NI data dump from NISRA suggests that the local economy has dodged a technical recession (i.e. two successive quarters of contraction) due to marginal growth in the most recent quarter. This was perhaps unexpected. But output edging above the contraction mark rather than below it will be of little consolation to, or consequence for, households across NI struggling to pay heating, electricity and food bills.
This week, many will be raising a glass to the festive season as we enter the peak time for Christmas parties. But the Bank of England will be playing party pooper by raising interest rates again on Thursday for the nineth consecutive meeting. And overall, for those looking something to celebrate, the positives in the economy – locally, nationally and globally – seem to be in short supply.
Prior to the pandemic, new car sales used to be a useful and timely barometer of consumer confidence. But the supply chain disruption following Covid-19 and the Ukraine-Russia war ended that. The latest month’s new car sales are, in many cases, a reflection of consumer demand and confidence prevailing in the summer of 2021. The reality of consumer confidence today is severely dampened by the omnipresent cost-of-living crisis and higher interest rates.
If we look at the last 14 years, the reality is that we have been in a bubble that has sent many things such as global property and equity prices to stratospheric levels. This bubble was created by extremely low interest rates and was pumped up further by other central bank actions including quantitative easing (QE). But now the bubble is deflating fast as interest rates rise due to soaring inflation, and we’re experiencing an extremely bumpy re-entry as we come back down to earth. But whilst we’re re-entering the higher interest rate environment of old, it is a manifestly different world.
‘Taking back control’ has gone down as one of the most effective political slogans of all time. But turning that slogan into reality has proven to be much more difficult. The UK left the EU but doing so hasn’t brought the kind of sovereignty advantages Brexiteers had envisaged. Outside the EU, the UK’s destiny is still very much tied to forces beyond Westminster. What has become very clear in recent months is that the fate of countries like the UK is closely tied to the markets and that the markets will reward or punish you in equal measure depending on how you behave.
To say that September has been a dramatic month in politics is an understatement. It marked the end of an era in so many ways. Queen Elizabeth II’s 70-year reign has come to an end with the longest serving monarch of all-time replaced by King Charles III.
Image Source: BBC NEWS
Continue readingOfficial statistics out earlier this week reported new record highs in the number of jobs. The labour market is a lagging indicator of economic activity with changes in output not impacting on staffing levels for a few quarters. Meanwhile a trio of output surveys covering private sector services, industrial production and retail sales revealed a loss of momentum in the second quarter of 2022. However, the various surveys revealed that some aspects of the economy are clearly faring better than others. Private sector services saw activity ease (-0.3% q/q) from its’ recent peak, with a more substantial fall occurring within the consumer sensitive retail sector. Manufacturing industry continued to expand in Q2 albeit the pace of growth halved relative to the previous quarter. The cost-of-living crisis, the legacy of Covid-19 and the impact of the NI Protocol are very much evident in the latest figures.
We’re well known in this part of the world for bemoaning the weather. But in recent times, it’s prices that we have been lamenting in our chit-chat with neighbours and in the pub. And that’s not surprising given the vast increases in the cost of things like gas and electricity that we have seen. To put this in context, if beer prices had increased at the same rate as gas, we’d now be paying about £40 a pint in some establishments.
The latest data for Northern Ireland house prices and the latest figures for UK inflation were both released this morning. Both showed strong rates of growth but whilst the CPI rate of inflation certainly has further to go until its peak, can we say the same for house prices?
We’ve heard lots of recent comparisons between today and 1976, given the heatwaves and drought that affected both years, and that 2022 is the UK’s driest year since. But whilst we have recently been basking in sunshine and dealing with the impact of the warm weather, it is the cost of heat, light and food for households this winter that should be on all of our minds.
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