The make-up of carparks has long been a good indicator of trends in the domestic economy, given that cars are the biggest discretionary expenditure item after purchasing a home. But the car market has also become a key barometer of what is happening in the global economy, and trends in the sector now need to be closely watched to understand what’s going on.
Consumer confidence both nationally and locally is not in a great place. Clearly the ongoing “political recession” isn’t helping the mood either. The good news, however, is that inflationary pressures continue to ease with the headline Consumer Price Index rising by 2.1% y/y in December. That marks the weakest rate of consumer price inflation in almost two-years. Significantly this welcomed move is coinciding with wages rising at their fastest rate in a decade.
Falling petrol prices were a key driver behind the latest downward move. Petrol price inflation slowed from 7.6% y/y in November to 1.5% y/y last month. Back in October prices were rising at 11.5%. This trend is set to continue with an easing in energy related inflationary pressures both in utility bills and petrol / diesel costs.
Significant price cuts to gas and electricity bills are expected to be announced later this month. Similarly, home-heating oil customers should see further significant falls in the coming weeks and months. Petrol and diesel prices have already fallen by around 2% in the first two weeks of January. Food price inflation also slowed dramatically during 2018. Having started the year at 3.9%, annual food price inflation eased to 0.4% in December. What does or doesn’t happen with Brexit (supply disruptions etc) could have a major bearing on food prices in 2019.
In the near-term, CPI inflation looks set to fall below the MPC’s 2% target in January with the annual pace of consumer price rises set to slow to 1.3% / 1.4% by Q4 2019. Against this backdrop and given the growing risks of a global slowdown coupled with the near-term concerns surrounding Brexit, the Bank of England isn’t going to be in a hurry to raise interest rates. 2019 could well see the Monetary Policy Committee sit on its hands and keep its Bank Rate at 0.75%.
Today sees the release of December data from the Ulster Bank Northern Ireland PMI®. The latest report – produced for Ulster Bank by IHS Markit – pointed to no change in new orders at the end of 2018. Meanwhile, business activity and employment continued to rise solidly, albeit at weaker rates than in November. Both input costs and output prices increased at marked rates again, but inflationary pressures showed some signs of easing at the end of the year.
2018 was the Chinese year of the dog, but in this part of the world, it will go down as the year of the backstop, when promises around the Irish border came back to bite Theresa May. Indeed, some have said that Brexit as a whole was the one instance when the canine caught the car and then didn’t know what to do with it.
What were the economic highlights and lowlights of 2018? What will be good, bad and ugly in 2019? Who will be next year’s economic villain? What word would you use to sum up what you expect to see in the next 12 months? These and many other questions about the Northern Ireland and global economies are asked and discussed in our new podcast, which we’ve boldly called the Big Economic Quiz of the Year.
And fittingly, we have some big fish from the local economics community contributing. Angela McGowan, Director of the CBI in Northern Ireland and Richard Johnston, Deputy Director of the Ulster University Economic Policy Centre join our own Richard Ramsey and business journalist Jamie Delargy to review, predict and ruminate.