Global recovery
Global Recovery has entered a soft patch due to headwinds:
- Higher Oil Prices
- The Japanese Earthquake
- Policy tightening in Asia leading to slower growth
We expect global recovery to revive Q3 and continue into 2012. The recovery will continue to be moderate and be fragile in the advanced countries.
1. Oil prices: has eased lately with the fall in oil prices and it should underpin a recovery following a soft patch.
2. Japan: A short but very significant decline in production and demand hitting the rest of the world.
3. China slowing- Industrial production has been slowing in China hitting at a critical point.
We expect growth to recover but downside risks still prevail:
Fortunately – pillars of strength still remain in global economy ( emerging markets and inflation pressure easing)
Factors that will support global growth in coming quarters
- A decline in oil prices
- Private consumption gains momentum on the back of improved labour market situation in advanced economies
- Credit growth rising- stronger willingness to lend
Strong corporates to spur investments and job growth
Data suggests UK recovery is still struggling..............
UK – was slow to emerge from recession / badly hit because of large exposures to Financial Services/ lack of exports
- Unemployment levels fallen to 7.7% - labour market flexibility
- Q4 contraction and then growth of only 0.5 in Q1 (flat-lining)
Problems remain:
- Austerity only biting now.
- Housing struggling – prices falling activity low
- Inflation still high (4.5% – May 11) – and will rise further
- Since emerging from recession in late 2009, Northern Ireland is currently experiencing a very weak recovery
- The indicators suggest a sluggish labour in terms of job creation but//unemployment has fallen back to 7.3% (7.7% in UK and 14.6% in RoI)
- A fall back into recession cannot be ruled out (probability estimated to be in the region of 15%)
Northern Ireland (like the UK) - recovery and confidence are weak
Subdued confidence due to:
- Pressure on public sector to downsize
- Spending and welfare cuts
- Retail feeling the pressure
- Housing market stalled
- Private sector jobs will not happen overnight
Structure of the NI economy needs to be addressed
Areas of concern remain:
- The Public/Private balance
- The lack of exports
- Inactivity Levels – 28.8% of working-age population
- Youth unemployment (30.7% of all claimants)
- Long-term unemployed over 40% of all claimants
- Large tail of under-achievement in secondary schools
But opportunities also exist ......
- Technology and Infrastructure – allow for remote working – particularly useful for growing Business Services
- Global opportunities clearly exist –Asia – demand for goods and services
- Weak sterling should make NI attractive for Euro customers sourcing goods and services. – Also implications for TOURISM / City of Culture spillover
- LT Commodity demand and prices– but we are experts in agri-food
- NI edge of Europe and good corporate governance – good place to invest
Some low-cost ‘tweaks’ required at NI and local level:
- Skills alignment required with growing sectors
- Linkages between universities, business and government need to be grown
Skewing of economic development resources equally to enterprise, indigenous companies and FDI.
Summary:
- Global recovery has hit a soft patch but we expect it to recover
- But UK and NI experiencing a weak recovery and high inflation
- Local challenge to re-balance local economy
- Draft economic strategy in pipeline
- Public service cuts should be manageable:
- -But need to 1) drive out inefficiencies 2) reduce costs 3) raise local revenue streams
Source: Angela McGowan, Northern Bank, June 2011
