The UK economic outlook has warmed a little of late. A strong labour market performance and business surveys signalling growth for the first time in five months both provided a ray of light. Yet warmth also featured prominently at the World Economic Forum in Davos. The top five global risks identified in the Global Risks report for 2020 are all about the environment.Continue reading
A return of Stormont provided a confidence boost. But the honeymoon appears to be over. New Decade New Approach said all the right things but will positive actions follow? Optimists hoped the approach of the new Executive would be akin to Mario Draghi’s “do whatever it takes” commitment in 2012 for public services and the economy. Instead local politics quickly turned into Meatloaf’s “but I won’t do that”. With red lines drawn, ruling out water charges, increases in tuition fees and revenue raising, it looks a lot like the old approach.
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.
Last year was a record year for both the UK and Northern Ireland labour markets. Employment has never been higher and unemployment (for Northern Ireland) has never been lower. Given these labour market conditions one would assume that consumer confidence must be strong too? Not so. Previously having a job, or not having one, was a key determinant of whether a household or individual was in poverty. Over the last decade, however, a sustained period of below inflation wage growth and cuts to working-age welfare benefits has squeezed disposable incomes for those in work too.
If we consider politics over the past 10 years or so, what is clear is that there was a distinct step to the right in the UK, in the US and elsewhere in the world; the consensus around dealing with the fall-out of the financial crisis taking us in that direction. But there is evidence that we are now set for something of a left turn. And a look at the policies coming from the main UK political parties ahead of the General Election gives credence to this view.
Today’s batch of housing market figures for the third quarter could be summed up as “two up two down”. Two indicators (residential property prices and house completions) posted year-on-year growth. Meanwhile housing starts and the number of residential property transactions are on the wane.
Generation rent. House prices are always one of the most closely watched economic indicators by the general public or at least homeowners and potential first-time buyers. Although the rise of the private rented sector over the last decade means for an increasing share of society, rental prices are more relevant than house prices. Homeownership is not on the radar for as many under 40s as it once was.
Northern Ireland’s Labour Force Survey (LFS) churned out more record highs and lows of the positive variety in Q3 2019. However, looking through all the statistical noise there are still signs that suggest the labour market cycle has turned. A surge in self-employment has been accompanied by a reduction in the number of ‘employees’ working. Meanwhile the total number of hours worked and average hours worked has eased back from its highs earlier in the year. Given the marked deterioration in business conditions in Q3 and Q4 it is expected that this will increasingly become evident within the labour market in the coming quarters. Q2 2019 is still likely to have represented the peak in the total number of employee jobs as measured in the Quarterly Employment Survey.
After eight years at the helm President Draghi is bowing out. He will forever be remembered for three words – “whatever it takes”. He certainly played an outsized role in salvaging the single-currency project in its darkest days. It’s now over to Lagarde to pick-up the challenges – convincing reluctant eurozone governments to use fiscal space and pushing inflation back up to target.
US/China trade tensions are intensifying. The Chinese authorities announced $75bn 5-10% tariffs on US imports, targeting cars, oil and soya. US President Trump retaliated, unveiling further tariff rises though his stance at the latest G7 meeting was conciliatory. Meanwhile, Federal Reserve Chair Jay Powell hinted at another rate cut soon.
The latest slew of economic data will leave many wishing that government statisticians had taken a longer summer holiday. Faced with a slowdown in world trade, the German economy experienced a mild contraction last quarter, while prospects for the UK and US look ever more reliant on consumers.