Economic Outlook
The latest OECD Global Economic Outlook focuses on two equally probable scenarios – one in which a second wave of infections, with renewed lockdowns, hits before the end of 2020, and one in which another major outbreak is avoided. Global economic activity is forecast to contract by 6.0 per cent in 2020, assuming there is no second wave of COVID-19, with output predicted to plummet by 7.6 per cent in the event of a second wave. The Euro Area is forecast to contract by 9.1 per cent in 2020 in the event of a ‘single-hit scenario’ with an expected 11.5 per cent contraction if there is a ‘double-hit scenario’. The UK economy is forecast to contract by 11.5% if a second wave is avoided and by 14.0 per cent if a second wave hits before the end of the year.
Labour Market
The impact of COVID-19 on the Northern Ireland labour market is further reflected in the latest Labour Force Survey estimates. The number of people claiming unemployment benefits increased by 500 from June’s revised figure to approximately 62,800 in July. This is the third month that the claimant count was above 60,000; levels previously seen in 2012 and 2013. A total of 8,755 redundancies were proposed in the 12 months to the end of July 2020 with a further 163 proposed between 1st and 10th August. The number of confirmed redundancies (3,112) in the year to June 2020 was 74% higher than in the previous 12 months.
The unemployment rate for April-June 2020 increased over the quarter but fell over the year to 2.5 per cent. The NI rate is below the UK (3.9 per cent), RoI (5.3 per cent) and EU (6.7 per cent) rates. At the same time, the inactivity rate rose over the quarter and over the year to 26.4 per cent. While the employment rate decreased over the quarter and over the year to 71.7 per cent, it remains relatively high and above rates in 2018. However, within those included in the employed total, 21 per cent were temporarily away from work and 40 per cent were working fewer than their usual hours
Danske Bank Consumer Confidence Index
The latest Danske Bank Consumer Confidence Index showed that consumer confidence increased slightly in the second quarter of 2020 due to the lockdown restrictions being eased, but confidence levels remain substantially below the levels from this time last year. The Index rose from 119 in Q1 2020 to 122 in Q2 2020 but remained significantly below the reading of 136 posted in Q2 2019.
InterTradeIreland All-Island Business Monitor
The latest All-Island Business Monitor for Q2 2020 by InterTradeIreland showed that 53 per cent of NI businesses surveyed stated they are currently in business distress with 54 per cent of NI firms stating they have experienced a reduction in sales. Furthermore, 18 per cent of NI firms surveyed had decreased their levels of employment with 13 per cent stating that they were either planning to or had already started to make redundancies. Almost 4 in 5 (79 per cent) NI businesses believed that COVID-19 would impact their sales, with 65 per cent believing that their cash flow would be impacted and 62 per cent believing that their supply chains will be affected.
Motor Industry
According to the Society for Motor Manufacturers and Traders in July there were close to 4,400 new vehicle registrations in NI, a 16 per cent increase on the previous month (approximately 3,800 new vehicle registrations in June). July 2020 had the highest volume of new car sales for the month of July in over 10 years. However the year to date volume of new car registrations remains over 40 per cent lower than 2019 levels.
PMI
The latest results from the Ulster Bank PMI reported growth in the local private sector in July amid signs of recovery following sharp falls earlier in the year due to COVID-19. Business activity and new orders both returned to growth but backlogs of work and employment continued to decline. Business sentiment improved but firms remain pessimistic regarding the year-ahead outlook amid concerns around the impact of COVID-19 and EU Exit. Output prices decreased for the fourth time in the past five months despite a further sharp rise in input prices in July.