Chart of the Month – 10 years since the property price peak


As we approach the 10th anniversary of Northern Ireland’s house price peak (and subsequent correction), we’ve been seeing some encouraging signs in the mortgage market.

2016 saw Northern Ireland notch up its fifth consecutive year of mortgage growth. According to the Council of Mortgage Lenders (CML) there were 13,800 loans advanced for house purchase. This represented a rise of over 5% year-on-year, with last year’s total representing the most mortgages advanced since 2007.

Despite a rise of 80 percent since 2008 though, mortgage volumes in Northern Ireland are still only half of what they were a decade ago.

The number of first-time buyers in Northern Ireland hit a 10-year high last year (8,000). However, this is still over 10,000 fewer than 2001’s peak.

The recovery in the mortgage market has been more marked within the First-Time Buyer (FTB) segment than the Home Mover market. The latter’s recovery has been somewhat disappointing.

In 2016, there were only 5,800 mortgages advanced in the Home Mover market; this was just 1/3rd of the volume of activity in 2006 and on a par with 1980/81. Lack of supply of certain property types and the legacy of negative equity are hampering this market.

House building is on the rise and people are gradually paying off their debt. But the legacy of what happened 10 years ago will continue to be felt for some time to come.

Women lead the way in labour market figures


The headlines in Northern Ireland’s latest labour market statistics make for pleasant reading.

Unemployment is continuing to fall and fresh record highs and lows were established for the employment and economic inactivity rates respectively.

However, these headlines conceal a significant divergence with respect to gender. Continue reading

Chart of the Month – Wages still lower than in 2009


Following the economic downturn, one of the primary reasons why households failed to experience the ‘economic recovery’ was due to what was happening with wages. Between 2009 and 2013, the median annual wage for full-time employees in Northern Ireland fell by £2,418 or 9% when adjusted for inflation. Since this low in 2013, annual wages have increased by £1,719 or 7.1% in real terms to £26,069. Despite this wage recovery, annual earnings of NI full-time workers are still  almost £700 below their recent 2009 peak.

The highs and lows of the labour market


The latest batch of Northern Ireland labour market statistics was littered with highs and lows of the positive variety. Of particular note were the record high in Northern Ireland’s employment rate and the record low in the economic inactivity rate. These improvements were due to a notable improvement in female participation in the labour market. Other notable highlights included a record number of people in employment (847,000) in the three months to August 2016. Continue reading

Chart of the Month – Economic Surprise Index


More than three months have passed since the UK’s EU Referendum result. Since then we have become all too familiar with three words “Brexit means Brexit”. The economic impact to date could also be summed up in three words: better than expected. The Citi Economic Surprise Indices measure data surprises relative to market expectations.  A positive reading means that data releases have been stronger than expected.  Conversely, a negative reading means that data releases have been worse than expected. During the month of May the incoming UK economic data was much weaker than market expectations, hence the negative readings with the Surprise Index.  However, following the EU referendum on 23rd June there has been a steady stream of better than expected data. Indeed, the UK Economic Surprise Index recently hit a three-year high. Economic indicators ranging from the labour market to retail sales have exceeded the consensus opinion amongst analysts in recent months. While economic conditions following the post-Brexit vote have not been as bad as feared, it is too early to draw any firm conclusions on the economic impact from Brexit.  After all, Brexit hasn’t taken place yet and the UK remains in the EU. Furthermore, we don’t have any clarity on what type of Brexit deal the UK Government envisages or what the EU will accept.

Chart of the month

Chart showing UK Business Activity since July 2006, according to the PMI report

The UK Purchasing Managers’ Index (PMI) took a post-referendum wallop in July, with the composite index (both manufacturing & services but excludes construction) falling from 52.4 to 47.7 – the lowest reading since April 2009 when the UK was still reeling from the financial crisis {Remember with the PMIs 50 is the threshold between expansion (>50) and contraction (<50)}.

If maintained, it would typically mean a contraction of 0.4% in GDP in Q3 – a sharp reversal from Q2’s 0.6% rise. UK services output slumped to 47.4 in July – its lowest reading since March 2009. New orders in the service sector were particularly hard hit (45.5) as businesses entered ‘wait and see’ mode. Even service sector hiring seems to have been put on hold.

Manufacturing output also returned to contraction territory (49.1) for the first time since March 2013. However, the decline in manufacturing activity was much less pronounced than what was reported by the services sector. And a chink of light is that new export orders rose to its highest reading in almost two years – a presage that sterling’s recent fall may provide a boost to exports?

Construction activity slumped in June (46.0) and figures for July are not yet available. The hope is that it’s an initial shock which sees at least some rebound next month. After all in the immediate aftermath of the Brexit vote it looked like there would be no new Prime Minister (& Cabinet) until September.

The eagerly awaited July PMI survey for Northern Ireland will be released on Monday 8th August. Northern Ireland construction firms reported a contraction in activity in Q2 and this trend is expected to continue in Q3. The key focus in the July Northern Ireland PMI will be whether the local services sector mirrors the marked reversal in fortunes reported in the UK survey.

Chart of the Month: Sterling at lowest level against dollar since 1985

Chart of the month - sterling

Following last Friday’s EU-Referendum result, sterling suffered a record one-day loss with the pound dropping 8.1% against the US dollar to $1.367. This record one-day decline was almost double the 4.1% fall on Black Wednesday in 1992 when the UK exited the Exchange Rate Mechanism (ERM). This also took the pound to its lowest level against the dollar since 1985.

On Monday, sterling fell sharply again and briefly touched a low of $1.312 before closing one cent higher at $1.3225 at Monday’s close. The peak-to-trough fall from last Thursday night’s high of $1.5018 (after the polls closed) to Monday’s low represented a cumulative two-day decline of 12.6%. This represented the sharpest two-day decline on record.

Sterling has subsequently regained some of its recent losses and at lunchtime today (Thursday) was changing hands at $1.3450.  Looking ahead, a further fall in the value of the pound is anticipated with the prospect of fresh 36-year lows and a move below $1.30.

A fall below 1985 levels is not expected as the low back then was $1.0520. The recent falls will boost price competitiveness for UK goods and services (including tourism) within the US market.  However, the cost of US imports and holidaying within the US will be much more expensive.

Chart(s) of the Month

Chart showing UK petrol and diesel prices since 1979

Last year was a great year for petrol heads with the price of petrol and diesel falling for the third successive year. Petrol prices fell by 12.8% in 2015 with the decline in diesel prices even more marked at 13.9%.  Both of these price falls represented the steepest declines since 1986. Back then a litre of diesel and petrol was 36p and 37p respectively.  The trend in falling motor fuel prices has extended into its fourth year in 2016.  The average UK weekly petrol price hit a low of just over 101 pence per litre at the start of February with diesel dipping just below this figure. Since then, however, petrol and diesel prices have risen by 8-9% and climbed above the 109 pence per litre level. Despite these recent gains, for the first five months of the year, petrol and diesel prices are 7% (petrol) and 9% (diesel) lower than the average for last year.  Given that the price of oil in sterling terms has been on the rise in recent months.  Further increases at the forecourts look inevitable.

Continue reading