Economic weather map forecasts economic mizzle into 2013
12 July 2012Follow @PwC_NI
Northern Ireland can expect minimal or negative growth and falling employment to continue into 2013, according to business advisors, PwC.
PwC’s latest UK Economic Outlook published today [12 July 2012] says that overall UK economic growth will be virtually zero during 2012, and will show only modest recovery in 2013, with that growth being led by London and the South East.
PwC says that the continuing eurozone crisis will constrain recovery and depress confidence, with the economic climate beset by subdued earnings growth, higher household debt, static property values and further public sector job cuts.
Northern Ireland can expect the lowest growth amongst the 12 UK regions in both 2012 and 2013, with the housing market flat and export markets remaining difficult as the eurozone crisis constrains demand in an increasingly competitive market conditions.
PwC’s assessment of the UK property market also confirms that Northern Ireland house prices are continuing to fall and, in a special report on the UK house market, warns that they may not return to pre-crash levels till after 2020 – if at all.
PwC chief economist, Dr Esmond Birnie says, despite the gloomy forecast, the news is not all bad:
“Unemployment is rising but remains below the level experienced in previous downturns.
“At the same time, inflation should fall back towards its 2% target rate over the next year unless there is a significant resurgence in global commodity prices.
“This will boost real consumer spending power, which was severely squeezed in 2011 as prices rose much faster than earnings.
“And while Northern Ireland faces negative growth of around 0.4%, 2013 should bring the region back to growth of just over 1%.
“However, a decision on devolving Corporation Tax varying powers has been deferred again and there are concerns that Treasury and the Executive may not reach an agreement on the cost and practicalities of devolving the relevant powers.
“If that happens, the Executive may have to look to Scotland or Wales to see what lessons can be learnt from those regions in terms of devolving other tax varying powers.”
The UKEO report projects UK-wide GDP growth of around zero in 2012 as a whole, but picking up later in the year and rising to around 1.7% in 2013.
However, the UK business climate map will show a mixed forecast for the UK regions in terms of both employment and growth, with the UK Economic Weather Map below
Consumer spending growth of around 0.1% in 2012 and 1.3% in 2013 is expected as inflation falls back, easing the squeeze on real disposable incomes that led to a 1.1% fall in real consumer spending in 2011.
Nevertheless, structural shifts towards online spending will continue to pose significant challenges for traditional high street retailers.
Email: Esmond Birnie
Tel: +44 (0)28 9041 5808