Northern Ireland Economy Shows Signs of Cooling
The recent Northern Ireland Investment Summit held at Hillsborough Castle had a buzz of positivity, but the economy seems to be experiencing some weaknesses. According to data released this week, the Northern Ireland economy is cooling down, particularly in the services sector, which has been the driving force behind the economic growth since the pandemic.
In the first quarter of this year, the services sector experienced strong growth, reaching a record high in output. However, the recent data indicates a fall in this sector, specifically in the retail and hospitality subsector. This decline is not surprising, as these areas heavily rely on discretionary spending from consumers who are currently facing inflationary pressures.
The data covers the months of April, May, and June, during which inflation rates were at their highest, ranging from 7.9% to 8.7%. While it is optimistic to hope for consumer spending to recover as the inflation rate slows down, the rising interest rates are likely to put additional pressure on mortgage payers, leading to further strain on household finances.
Furthermore, the jobs market data also suggests that the economy is starting to cool. Although the job market had shown strong recovery since the onset of the COVID-19 pandemic, the Quarterly Employment Survey revealed the first quarterly decrease in employee jobs after two years of growth. Additionally, the number of people claiming unemployment-related benefits increased in August, and the overall unemployment rate saw an increase from the previous quarter.
The Purchasing Managers’ Index, a business survey conducted by Ulster Bank, also signals a potential downturn in the official data. Despite these negative trends, the Northern Ireland Investment Summit exuded a sense of confidence and optimism within the business community.
While some businesses have shown confidence unrelated to the conference, the persisting pressures on household budgets and high energy prices present challenges for the coming winter. It remains to be seen whether the recent weaknesses in the economy are temporary or indicative of a more sustained cooling down.