Economic outlook
Global growth is projected to decline by 4.9% in 2020 according to forecasts produced by the IMF World Economic Outlook, 1.9 percentage points below its April 2020 projections. The Euro Area economy is projected to contract significantly by 10.2% in 2020, revised down by 2.7 percentage points from the April outlook. The UK economy is also expected to contract by 10.2% in 2020, down by 3.7 percentage points from the April projection, highlighting the severity of the impact Covid-19 is expected to have on the economy.
Labour market
The impact of Covid-19 on the Northern Ireland labour market is further reflected in the latest estimates. A total of 6,941 redundancies were proposed in the 12 months to the end of June 2020 with a further 745 proposed between 1st and 15th July. The number of confirmed redundancies (2,602) in the year to June 2020 was 44% higher than in the previous 12 months. The number of people claiming unemployment benefits decreased by 1,200 from May’s revised figure to approximately 63,100 in June but remained more than double the number recorded in March. The unemployment rate fell over the quarter and over the year to 2.4%. The NI rate is below the UK (3.9%), RoI (5.6%) and EU (6.6%) rates. The employment rate decreased over the quarter and over the year to 71.6%. At the same time, the inactivity rate rose over the quarter and over the year to 26.6%.
Northern Ireland Composite Economic Index
The impact of Covid-19 on the economy is only partially reflected in the latest Northern Ireland Composite Economic Index, which indicates that economic output decreased by 2.8% over the quarter and by 3.2% over the year to Q1 2020. The decrease over the quarter was driven by decreases in the Services (-2.2pps) Production (-0.5pps) and Construction (-0.1pps) sectors. On an annualised average basis, activity decreased by 0.4% over the last four quarters to Q1 2020 compared to the previous four quarters.
Construction output
The impact of Covid-19 on the economy is only partially reflected in the latest NI Construction Bulletin which shows that the total volume of construction output in Q1 2020 decreased by 1.0% compared with Q4 2019 and was 3.3% lower compared with the same quarter in 2019. The decrease in output from the previous quarter was driven by a 10.0% decrease in Repair and Maintenance and offset by a 7.4% increase in Housing. The total volume of construction output in NI has been on an upward trend since Q4 2013, however recent quarters have shown signs of levelling off, with decreases in 3 of the last 5 quarters.
HMRC CJRS and SEISS statistics
Figures published by HMRC estimated that 240,200 employments in NI have been furloughed up until the end of June using the UK government’s Coronavirus Job Retention Scheme (CJRS), an increase of 28,500 compared with claims made until the end of May. At the same time, self-employed individuals in Northern Ireland have made approximately 76,000 claims using the Self-Employed Income Support Scheme (SEISS), totalling £216m - this is an average value of £2,800 in terms of claims made, slightly lower than the UK as a whole (£2,900).
PMI
The latest results from the Ulster Bank PMI reported further declines in the local private sector in June due to Covid-19. However, rates of contraction in business activity, new orders, backlogs of work and employment softened with a loosening of lockdown restrictions. Firms remained pessimistic regarding the year-ahead outlook amid concerns about the long-term impact of Covid-19. Input costs rose sharply in May while output prices were broadly unchanged, ending a three month sequence of falling charges.
NI Chamber of Commerce QES
The latest NI Chamber of Commerce Quarterly Economic Survey suggested a significant collapse in business activity as a result of the Covid-19 pandemic. Recruitment activity has more than halved over the quarter with just 27% of manufacturers and 21% of services trying to recruit. Of those businesses surveyed, 77% have furloughed employees whilst 12% have made staff redundant. Over half of businesses surveyed stated that they plan to reduce staffing levels post Covid-19. Cash flow has also deteriorated rapidly over the quarter with two thirds of businesses recording a worsening cash flow position and 69% of businesses believe that their business prospects will deteriorate over the next 12 months.
Danske Bank Quarterly Sectoral Forecasts
The latest Danske Bank Quarterly Sectoral Forecasts expect the NI economy to contract by 11.0% in 2020 with the accommodation and food services sector expected to be the most impacted with a 38% contraction in 2020.
Further information
If you have any queries please contact analyticalservices@economy-ni.gov.uk