Experts upbeat despite GDP woes
Dip in growth branded just a 'red herring' as economists stay bullish
Northern Ireland is remaining relatively upbeat despite plunging GDP figures and the spectre of a double-dip recession for Great Britain, one of the region's biggest export markets.
One expert has said that the figures are a 'red herring' and that high inflation remains the single biggest threat to the economy here.
The measure of GDP decreased by 0.2% in the first three months of 2012.
Production output was down by 0.4%, following a decrease of 1.3% in the previous quarter, construction sector output decreased by 3.0% and GDP in volume terms is flat when compared with the same period in 2011.
However, output in the service industries increased by 0.1% in the first quarter of 2012, following a decrease of 0.1% in the previous quarter.
Richard Ramsey, chief economist with Ulster Bank said that the figures may yet be revised.
"Other surveys which have been reliable indicators of GDP in the past are signalling positive growth," he said.
"In time, we expect subsequent revisions to post positive growth in due course.
"The focus on a marginally positive or a negative number is something of a red herring.
"Instead, the simple fact is even if the growth rate is positive the rate of economic growth is simply too low and inflation remains too high. It is this combination that is of most concern.
"Ultimately, the main risk is that the rate of UK economic growth is weaker than the forecasts from the Office for Budget Responsibility last month.
"In turn, all current and planned budgetary measures are predicted on these growth projections.
"If these are not met, the UK - and by extension Northern Ireland - can expect additional public expenditure cuts and tax rises."
Nigel Smyth, regional director of the CBI in Northern Ireland, agreed that despite the depressed figures, anecdotally, the manufacturing sector is improving.
"While the slightly lower than average GDP figures were a bit of a surprise, we had already been told in previous surveys that some of our larger manufacturers were experiencing delayed and deferred orders so a dip was to be expected," he said.
"A lot of firms, particularly in the services sector, have seen a pick-up since January. I cannot see these latest figures having a huge impact on what is going on here.
"Those firms who are heavily reliant on GB and European business will of course see a very slow pace of growth, but more and more firms are seeking opportunities in the USA.
Angela McGowan, chief economist at Northern Bank, said that the latest official data is "disappointing" given that a number of recent business surveys in the UK had suggested a pickup in the first quarter, plus a drop in the Northern Ireland unemployment level.
A quarterly breakdown of the recovery since the UK emerged from its last recession:
- April to June 2009 -
This was the final quarter of declining output before the UK pulled out of recession. GDP shrank by 0.2%.
- July to September 2009 -
It was thought until recently that the UK was still in recession in this period but revised figures revealed the economy had in fact returned to GDP growth of 0.2%, but was held back by continued weakness in the financial sector.
- October to December 2009 -
The economy grew at 0.7% as families appeared to start spending again.
January to March 2010 -
- The UK started the year with 0.4% growth. However, exports continued to fall, while the return to 17.5% VAT hit consumer spending.
- April to June 2010 -
The economy grew at 1.1%, its fastest pace since 2007, thanks to the construction sector. However, this represented a peak in the recovery.
- July to September 2010 -
Growth held up well with expansion of 0.7%.
- October to December 2010 -
Arctic conditions led to a shock 0.5% decline in GDP as an £81bn package of spending cuts was about to be revealed by the Chancellor.
- January to March 2011 -
The economy returned to growth in the first quarter of 2011 but GDP only grew by 0.2% - effectively meaning the economy had still declined over a six-month period.
- April to June 2011 -
The economy declined again by 0.1%.
- July to September 2011 -
The services sector grew at 0.7%. But real disposable income growth slowed to 0.3% from 1.3% in the previous three months.
- October to December 2011 -
Plunging business investment led to a fresh decline of 0.3% in output.
- January to March 2012 -
The UK found itself in recession once again as GDP dropped 0.2% in the first quarter of the year, signalling two quarters of declines.