As delegates arrived at the Northern Ireland investment conference, there was a sense of autumn in the air. Rain poured from the darkening sky, and a blustery wind swept across the square. This atmospheric backdrop seemed to mirror the cooling of the Northern Ireland economy, as data released this week indicated a slowdown.
The services sector, which has been the driving force behind economic growth since the pandemic began, experienced a contraction of 0.8% in the second quarter of this year. While business services continued to perform strongly, the largest subsector, retail and hospitality, saw a significant decline. This decline is not unexpected, as these areas heavily rely on discretionary spending, which has been impacted by high inflation rates.
Consumer spending may have the potential for recovery as the rate of inflation slows. However, rising interest rates will begin to affect mortgage payers, putting further pressure on household finances. Additionally, data from the jobs market also suggests a cooling economy. While the jobs market initially recovered post-pandemic, recent figures indicate a decrease in employee jobs, an increase in unemployment-related benefit claims, and a decline in overall employment and the employment rate.
The Ulster Bank business survey, known as the Purchasing Managers’ Index, further supports the indication of a cooling economy. The survey revealed a decline in overall business activity for the second consecutive month across all major sectors.
However, despite these challenges, the investment conference served as a beacon of optimism for the business community. Some businesses even expressed confidence through their plans for expansion and investment. For instance, IT firm Options announced its intention to create 200 new jobs, and property investors Michael and Lesley Herbert acquired the Forestside shopping complex in Belfast, paying over the asking price.
Nevertheless, the pressure on household budgets and high energy prices suggest that Northern Ireland may face another tough winter.
Definitions:
1. Services sector: The part of the economy that provides intangible goods or services such as banking, transportation, and hospitality.
2. Discretionary spending: Spending on non-essential goods or services that are not necessary for daily living.
3. Inflation: The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.
4. Jobs market: The labor market where individuals seek employment and employers seek workers.
5. Purchasing Managers’ Index (PMI): An economic indicator derived from monthly surveys of private-sector companies, providing insight into business conditions.
Sources:
– BBC News NI (Author: John Campbell)
– Ulster Bank Business Survey