Danske Bank Oxford Economics Quarterly Sectoral Forecasts Quarter

Transcription

1 Danske Bank Oxford Economics Quarterly Sectoral Forecasts Quarter

2 Forecast Summary Recent economic indicators continue to suggest that Northern Ireland s recovery is gaining momentum. Unemployment has been coming down very gradually, with the number of people claiming Jobseeker's Allowance standing at 58,700 compared to nearly 65,000 a year ago. The Danske Bank Consumer Confidence Survey reports confidence is at highest level since records began in September Business confidence also continued to increase steadily, accompanied by a number of high profile investment and job announcements that will help to strengthen the recovery. Thus, we now expect Northern Ireland s GVA to grow by 2.3% in 2014 which would be the strongest performance since 2007, but downside risks remain. House prices have stopped falling and some quarterly surveys have signalled house price. The most important factor behind this appears to have been an improvement in mortgage availability, which was kick-started by the Bank of England s Funding for Lending Scheme (FLS). This stabilisation within the housing market appears to have fed through to the construction sector, with the latest data suggesting a rise of 320 employees within the sector the first increase in 8 quarters. The market appears to have bottomed out and we expect house price and transactions to pick up throughout However, those who bought property during the housing boom are likely to remain in negative equity for some time. GVA rates - NI Q on Q Y on Y Q Q Q Q Q Q Q Q Q Q Q Q GVA rates - UK Q on Q Y on Y Annual Annual Q Q Q Q Q Q Q Q Q Q Q Q Source: Oxford Economics Note: Year on year is calculated using the from say Q to Q % Q Q NI UK Q Q Q Q GVA (%) Q Q Q Q Q Q Q Q Q Q Drivers of Growth in 2014: The drivers of economic during 2014 include: low interest rates, improved consumer and business sentiment, low inflation (which will support household disposable incomes) and the much improved global economic environment Source: Oxford Economics

3 Recovery expected to broaden out Employment/GVA Total Employment Total GVA Total 6 4 Lower inflation has meant that the squeeze on real wages has lessened considerably over the latter months of 2013 and we expect households to see real wages increasing again during Falling unemployment and the emergence of skills shortages in some sectors should put upward pressure on wage. At the same time, we expect inflation to cool to below 2%, reflecting the stronger pound, weaker pressures from energy and food prices as well as a large amount of spare capacity, which will continue to squeeze margins. These factors will boost households spending power, though this process will be gradual and in the near term consumer spending is likely to slow. However, just because the consumer sector is likely to cool, does not mean that the wider recovery is running out of steam. Prospects for the housing market remain positive, with stronger demand being met by a robust pickup in supply, which is both contributing to the recovery in economic and helping to keep a lid on house prices. And the business surveys too have reported encouraging trends, offering reassurance that the long-awaited broadening out of the recovery will begin in earnest this year. Indeed, the latest ONS data has revealed that overall business investment at the national level rose by 2 percent in Quarter 3 last year. Employment Growth: Employment is expected to continue throughout 2014, with an increase of around 7,000 jobs forecast over the next twelve months. Unemployment is expected to continue to fall, though welfare reform could slow this rate of contraction. Employment (000's) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q Private services to remain a employment key driver of In terms of job creation the biggest contributions are expected to come from professional and administrative services, construction, manufacturing and accommodation and food services. The Professional services sector which includes management consultants, engineers, architects, lawyers and accountants is expected to expand by 4.7% this year and is forecast to create 1,500 jobs. As the recovery takes root in the wider economy and business volumes grow, the professional services sector should experience a strong recovery. The Administrative services sector is expected to expand by 1,800 jobs over the year ahead driven by a greater use of recruitment workers and outsourcing of activities. The sector by its nature is strongly linked to the overall performance of the economy, as the largest contributor to the sector is employment activities (agency workers). Employment in the Manufacturing sector will expand by around 800 during This sector is expected to grow by 3.4% over the year and it should hopefully benefit from the improved European and global economic environments. In addition, business surveys look increasingly positive for manufacturing with the Q4 Chamber of Commerce survey reporting that manufacturing business confidence and investment intentions continue to strengthen. Challenges for this sector in the months ahead are expected to come from the stronger pound, a skills deficit GVA (% year on year )

4 and high energy costs all of which continue to present a challenge for this sector. Key drivers of the construction outlook are improvements in the local housing market combined with a number of large scale investment projects. For example, work on the University of Ulster s new campus, the Waterfront Hall and the rolling out of the natural gas network to the west of Northern Ireland will contribute to the overall recovery of this sector. In addition, the Executive s January monitoring round has released a further 20 million for roads maintenance. As the construction sector has shed almost 30% of employees since 2007, the announcement of these large infrastructure investments are widely welcomed. Overall the sector is expected to grow by 3 per cent this year and employment levels are forecast to rise by roughly 850. The Wholesale and Retail sector which currently makes up around 15 percent of the local economy is set to grow by 2.6 per cent this year. However, because of the growing trend for online shopping, actual employment increases are expected to remain more muted at around 550 in the year ahead. Accommodation and Food Services - the local hospitality sector has benefited in the last few years from a number of high-profile international events and is expected to continue growing in The Giro d Italia will bring more tourists to the region this summer and will allow for the continual marketing of NI at an international level. This year the hospitality sector is expected to grow by 1.8 per cent and is forecast to create roughly 1,000 jobs during The public services sector (public admin, education and health) is expected to continue to act as a drag on, with loss of 1,200 jobs estimated over the next 12 months. This is underpinned by the on-going government austerity measures. Employment Growth Summary: GVA Growth Summary:

5 Risks to forecast: However risks exist which could undermine the strength of Northern Ireland s recovery. For example welfare reforms have yet to be implemented within Northern Ireland and the stronger pound could hinder the manufacturing sector in the year ahead. The Scottish referendum on independence will also bring a degree of uncertainty to the UK during A victory for the yes campaigners in Scotland in September this year would have implications for the local economy in terms of the corporation tax debate, attracting future investment and could impact also upon overall levels of public expenditure. Global risk: At the global level geopolitical risk surrounding the conflict between Ukraine and Russia has increased. Both countries hold dominant positions in the global commodity markets Ukraine in the market for corn, rapeseed and wheat and Russia in the world energy market. Western Europe relies heavily on imports of oil and natural gas from Russia. Furthermore, Ukraine has considerable crude steel production. So far, there is no indication that the physical market for these commodities has been affected. However, if the crisis escalates there could be an impact upon global commodity prices. Similarly we would expect to see prices fall back should the tensions ease. Other global risks include a large credit event in China with a default of a bigger trust fund or some other financial institution.

6 Annex Tables Table 1: GVA ( m2010) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, & steam Water supply; sewerage, waste management Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities Total Year on Year Growth (%) Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, & steam Water supply; sewerage, waste management Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities Total Copyright Danske Bank / Oxford Economics All rights reserved. The contents of this publication, ether in whole or in part, may not be reproduced, stored or transmitted without the prior written permission from Danske Bank / Oxford Economics

7 Table 2: Employment (000's) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, & steam Water supply; sewerage, waste management Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities Total Year on Year Growth (%) Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, & steam Water supply; sewerage, waste management Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities Total Copyright Danske Bank / Oxford Economics All rights reserved. The contents of this publication, ether in whole or in part, may not be reproduced, stored or transmitted without the prior written permission from Danske Bank / Oxford Economics

8 Table 3: Other variables Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Unemployment Year on Year Growth (%) Unemployment Copyright Danske Bank / Oxford Economics All rights reserved. The contents of this publication, ether in whole or in part, may not be reproduced, stored or transmitted without the prior written permission from Danske Bank / Oxford Economics

9 Danske Bank is a trading name of Northern Bank Limited and is authorised and regulated by the Financial Services Authority. Registered in Northern Ireland R568 Registered Office: Donegall Square West, Belfast, BT1 6JS Northern Bank Limited is a member of the Danske Bank Group. This is the opinion of Danske Bank, on occasion based upon research conducted at the time and obtained from sources believed to be reliable. This may be subject to change without notice and is not a personal recommendation