CEE’s Economic Insight.

A round up of weekly economic news from Northern Ireland and beyond

Northern Ireland

A common analogy of Northern Ireland’s economy over the last 30 years is of one that has been flat-lining. This makes the local housing and construction bubble, which burst in 2007, all the more remarkable. A report published this week showed that house prices are still falling and did so by a further 10 per cent over the last year.

The impact the collapsed housing market and reduced public spending has had on the construction industry was illustrated this week with the publication of RICS Northern Ireland Construction Market Survey showed that Northern Ireland remains the UK region with the largest number of chartered surveyors reporting declining workloads with a net balance of -53, compared to -18 for the North of England, the next region, and -7 for the UK as a whole.

The impact the collapse has had on the wider economy was also illustrated this week as calls were made for a Northern Ireland NAMA style bank to take bad construction debt off the books of businesses in a bid to get banks to start lending to companies with successful core business again.

Registrations of new cars in Northern Ireland fell 6.5 per cent in January while those in Wales fell 4.3 per cent and England 0.3 per cent, according to a regional breakdown of new car registrations. New car sales are considered a good reflection of consumer confidence and the health of the economy, which does not bode well for Northern Ireland. A contributing factor to these figures may be the high price local consumers have to pay for fuel; as the Consumer Council revealed this week we paid the highest cost for petrol, diesel or both across the UK and the Republic of Ireland during every month in 2011. And during December 2011, and January 2012 Northern Ireland paid the highest price for diesel in Europe.

The cost of natural gas was also in the news this week as Phoenix rejected the Utility Regulator’s proposals shift monies destined for network upkeep and extension back to customers, which would save big businesses here £10,000 a year while domestic consumers could expect savings of £10 a year. Phoenix suggested that the move would remove tens of millions of pounds off the company’s value, which would damage shareholders and ultimately customers.

The Rates (Amendment) Bill passed the Final Stage in the Assembly this week, much to the consternation of the Northern Ireland Retail Consortium which speaks on behalf of major retailers in Northern Ireland. The Consortium claims the Bill unfairly discriminates against one part of the retail sector. The Executive is not resting on its laurels when it comes to revitalising our town centres as the Minister for Social Development is setting up a taskforce to develop an action plan to help revitalise our town centres. As part of the process Minister McCausland has invited Mary Portas, of the Portas Review, to give advice.

The tourism sector was given a boost this week as it emerged that tourist numbers were up six per cent on last year with tourism income up 20 per cent which further suggests we are providing more attractions and ways for people to spend their cash.  One of the UK’s leading travel journalists has also claimed that the Titanic building will exceed all expectations when it opens this year, even comparing it to the Guggenheim in Bilbao, but with an interesting interior. 

Finally a report published by the Trade Union Congress stated that Northern Ireland will lose the biggest percentage of public sector workers, at 3.2 per cent compared to other regions of the UK.

UK

The Bank of England pumped £50bn into the UK economy this week in further round of quantitative easing, bringing the total amount to £325bn. Amid concerns that this might become a permanent fixture of the UK economy, pensioners and other saving groups lamented the impact the policy was having on their saving plans.

The five main UK banks missed their Project Merlin target for lending to smaller firms. The British Bankers' Association figures may fuel the arguments of those who claim quantitative easing is not a direct enough tool when it comes to stimulating the economy.

The price of UK manufactured goods rose in January by 0.5%, the fastest pace in nine months as manufacturers increased prices of alcohol, petroleum products and clothing. Despite this inflation at the factory gate eased to 4.1% in January from 4.8% the month before. But this was above the 3.7% many had predicted increasing fears that inflation will not fall as far as many had hoped this year.

The number of permanent jobs created by employers increased for the first time in four months in January with construction staff being most in demand.

Republic of Ireland

The week began with the Taoiseach Enda Kenny being pressurised into a denial that the compact agreed with Ireland’s EU partners would lead to years of austerity. And whilst it appears the State is wedded to reducing the size of the public debt, evidence shows that despite the financial meltdown the average credit card debt in the Republic has only fallen by €20 in three years.

In an attempt to attract more Foreign Direct Investment the Irish Government has included a proposal in its Finance Bill which will see skilled workers in certain sectors be given tax breaks. Ireland’s manufacturing rose in December by 3.5 per cent in December meaning Ireland’s industrial production fell by 1.5% in quarter four of 2011.

Europe

This was a difficult week for the financial heavy-weights in Europe as amidst increasing social unrest on the streets of Athens they awaited the Greek Parliament’s vote on new austerity measures proposed in lieu of a further £130bn bailout for the stricken economy. The vote raised debate as to who exactly will be saved by Greece’s agreement to the package – European banks or the Greek people.

Despite the political backdrop the private sector economy of the European Union registered its first improvement in productivity for six months at the start of 2012. However, the credit ratings agency Standard and Poor's downgraded its assessment of almost all of Italy's major banks.

Europe’s dependency on external natural resources was illustrated this week as Russia reduced the supply of natural gas amidst the extremely cold spell due to increased internal demand.

Finally, a controversial report was published this week by the New Economics Foundation which overfishing of EU fisheries is costing £2.7bn a year and 100,000 jobs. However, allowing fish stocks to recover would mean loss of livelihood to current fishermen.

The World

The US trade deficit widened in December to its biggest gap since June – with imports rising to record levels - this was despite Chinese exports falling in January.

And finally Africa’s biggest car plant was opened in Morocco this week by Renault, employing 2,000 local people.