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Economic Scene

Economic Scene

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Economic Scene

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  1. Economic Scene Angela McGowan Chief Economist, Danske Bank UK Date: Feb 2013

  2. Global Scenarios: the tide is turning GLOBAL RECOVERY: Global economy to recover in 2013 as policy uncertainty fades and global policy stimulus has become stronger. • GDP to rise 3.8% in 2013 after 3.3% in 2012. • Emerging markets are expected to recover from a two-year slump, which will be an important impetus for global demand. Fiscal policy tight credit in the euro area and low wage growth in advanced economies should keep the global recovery moderate. Headwinds – expected to ease / US Budget agreements should be resolved. We expect a low volatility environment – commitments from US Fed and also commitments from ECB will help.

  3. “The current situation can be summarized like this: we have disappointing hard data from the end of last year, some more encouraging soft data in the recent past and growing investor confidence in the future”. • Olli Rehn, EU Economic Affairs Commissioner

  4. Closer to home the picture not so rosy... • US and Emerging markets showing relatively strong recovery but.. • UK and many European economies are struggling with the austerity route. • IMF has warned that the austerity choking growth. (should be a marathon not a sprint)

  5. Coalition failing to meet its targets..... • Financial crisis and recession have led to big rise in the UK’s public sector debt and a weakened economy. • Government strategy called into question as UK loses its AAA rating.

  6. Northern Ireland’s new composite index for the economy. • The data suggest that the NI economy has contracted by 6% since outset of recession and lost approximately 50,000 jobs (mostly construction and retail)

  7. GDP recent annual growth and forecasts … Annual growth (GDP) % Source: Oxford Economics; ONS, CSO and Central bank of Ireland

  8. But some sectors in NI will perform better than others...

  9. NI’s Labour market: • Labour market expected to shrink further over this year before modest growth returns in the latter half of 2014. • Further shedding of jobs in public sector expected in 2013 and 2014

  10. While employment shrinks unemployment will rise • N.B NI’s headline unemployment data could be pushed higher this year – as reform of Welfare Benefits will result in DLA & incapacity claimants moving on to the unemployment register.

  11. Will welfare reform impact? Benefit claimants per 1000 working age people, UK regions, 2011 Source: DWP & DSD

  12. Various influences on GDP in the months ahead

  13. Inflation : looking to stay above target for next two years

  14. Consumer confidence has been improving Households continuing to reduce debt Housing market starting to stabilise Depreciated pound – double edged sword – good for exports, but impacts on inflation Any positives?

  15. Confidence has also been hit and remains low...but is slowly showing improvement...

  16. Households repairing balance sheets – rise in savings due to uncertainty - but causes fall in aggregate demand....

  17. But UK household balance sheets steadily improving...

  18. “Signs of Price Stability in NI Housing Market”…Source: UU Survey Feb 2013 DFP: Residential House Price Survey, Published February 2013 • Transactions up 20% Q4 year on year • Around 3,700 verified residential properties sold in Q4 • Residential property prices are now 13% lower than Q1 2005 and less than half of the peak value of the housing market in Q3 2007

  19. New cars down by 1% in Quarter 2 relative to one year ago This is the eighth consecutive quarter to show a year on year decrease Substitution happening - Rail journeys up 10% year on year But: NI ‘Big-ticket’ items are still struggling...

  20. NI had structural problems even before the financial crisis in 2008. Local economic policy now addressing the following... • Structural imbalance • Lack of export focus • Inactivity levels – 26.9% which is significantly higher than UK average 22.4% • LTU and Youth Unemployment • Skills – do skill match future economic requirements?

  21. Challenges Greater environmental awareness – increasing demand for sustainable solutions Waste management European WEEE (Waste Electrical and Electronic Equipment) Directive Input costs: Energy and other input costs – fluctuations Exchange rate fluctuations (buying inputs or receiving overseas payments) – let the bank help! Distribution - transport costs rising and falling with oil prices

  22. But what about Polymers industry specifically? The event will be of interest to researchers looking at new materials medicine related applications and industry representatives who are already working in this sector or who are looking to break into this sector. Opportunities Polymer science and technology – exponential expansion in last 2 decades Engaging in higher levels of R&D and innovation -Uncovering all R&D tax credit opportunities available. /Innovation grants from Invest NI - £10,000 Greater collaboration with universities Growing opportunities with Life Sciences / Pharmaceutical Industries / Renewable Energy Greater collaboration with Bio-medical engineering sector – fastest growing sector in RoI – new materials constantly required for medical related applications NETWORK with different industries... https://www.connect.innovateuk.org

  23. Reports available at www. @ danskebank.co.uk/economy