Today sees the release of September data from the Ulster Bank Northern Ireland PMI®. The latest report – indicated that the private sector remained in a downturn as output and new orders fell again. More positively, employment continued to increase, contrasting with the UK-wide trend. Input costs and output prices continued to rise, but at rates that were much weaker than seen over the past three years.
With the price of potatoes having increased 20 per cent in the last year, something of a fish and chip war has broken out on highstreets as cost-conscious consumers seek the best value take-away. Food price inflation is at an eye-watering 45-year high which is concerning for households everywhere. It should, including the price of potatoes, start to ease. But more concerningly perhaps, the price of a different kind of chips – the computer variety – is likely to start going rapidly in the other direction.
Last week’s releases suggest that February has been a favourable month for UK economic activity. An improved economic outlook since Q4 seems to be the main driver, along with some seasonal factors. But let’s not heave a sigh of relief just yet. Inflation is still in double digits, and borrowing costs are elevated. A recession is still on the table, although latest figures suggest it’s likely to be milder than many thought. And the NI Protocol logjam appears to be on the cusp of a breakthrough. Watch this space.
Last week the Bank of England joined the bandwagon of advanced economies’ central banks in continuing to hike interest rates. But it came with two sources of hope. First were some clearer signs that the Bank is approaching the end of the tightening cycle. Second was a slightly rosier outlook, namely a shallower recession and a less sluggish recovery, than was forecast in November. It’s still set to be a distinctly challenging year, but it counts as good news for now.
Last week saw a plethora of key economic releases, what’s the gist of it? Still a mixed picture. Chinks of light in some areas, but telltale signs of mounting challenges in others. Retail spending was down despite the seasonal boost one would expect from end-of-year holidays, higher rates are crimping demand for credit and dragging down the housing market. Granted, consumer prices are in retreat but too slow for now to actually make a difference on living standards.
Today saw arguably the biggest fiscal event since George Osborne became Chancellor. Then, we saw austerity 1.0 when the fiscal adjustment was split roughly 80% spending cuts and 20% tax rises. This time around, the current Chancellor, Jeremy Hunt, has gone for more of a 55:45 split (£30bn of spending cuts and £25bn of tax increases). Back then, the Bank of England’s actions in slashing interest rates, to what was then a record low, effectively softened the pain of austerity, therefore making it easier for the Chancellor to push forward with big spending cuts. This time around, the Bank of England is doing the opposite. This means that households are being hit from all angles in the form of interest rate rises, tax increases and spending cuts, whilst inflation is rampant. The Chancellor’s and Governor’s hands are effectively tied. Jeremy Hunt is walking a tightrope of shoring up the public finances in a way that limits the depth and length of the recession. For instance, the tax rises have been aimed at areas that will least impact economic growth, and spending restraint has been targeted outside of growth generators like capital investment. Moreover, the timing of this coincides with the next General Election, with spending increases (on health an education) and modest tax rises before, and spending cuts and significant tax rises after. Despite receiving a £650m Barnett consequential for the next number of years, Stormont still faces a fiscal black hole of probably the same amount for the current financial year.
Today sees the release of October data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by S&P Global – pointed to further reductions in activity and new orders amid ongoing cost pressures, while business confidence sank further. That said, companies continued to expand their staffing levels as part of efforts to rebuild workforce numbers following the pandemic.
This week’s interest rate decision from the Bank of England will be the first since the September “mini-budget” announcement unleashed a period of political and market turmoil. Markets and economists are counting on a 75 bps hike—the largest since 1989, and a quantum the ECB chose to adjust its benchmark rate just last week. But the real pain for the MPC is forecasting the economic and inflation outlook amid the current uncertainty around the new PM’s pending fiscal strategy.
Today sees the release of August data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by S&P Global – indicated that the Northern Ireland private sector remained in contraction as demand continued to be impacted by intense price pressures. That said, there were further signs of inflation softening. Meanwhile, firms remained pessimistic about the year-ahead outlook and the rate of job creation softened to an 18-month low.
It used to be that nobody wanted to mention the word recession and doing so was seen as a self-fulfilling prophecy. But going through the deepest recession on record from a Northern Ireland perspective during the pandemic has perhaps desensitised us. At the minute, recessionary chatter is actually the norm. Around the world, talk of the roaring 20s has been confined to the dustbin. Like Covid, talk of the R-word is spreading fast.
