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Growth forecast revised as recovery runs out of steam

Year ends on 'sour note' as services sector suffers

By Margaret Canning and Holly Williams

Published 24/12/2015

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Northern Ireland's economic growth for this year may turn out to be more subdued than anticipated after UK-wide expansion was revised downwards, an economist has said.

The Office for National Statistics (ONS) blamed a weakening services sector for the revised estimate for from 2.3% to 2.1%.

Growth in the third quarter was revised down from 0.5% to 0.4%, while second quarter growth went from 0.7% to 0.5%.

PwC chief economist Dr Esmond Birnie said the economic changes were "downbeat, but hardly disastrous".

He indicated PwC had forecast Northern Ireland economic growth of 1.6% for this year and 1.5% next year but added: "Given the ONS figures, even those fairly low figures may prove too high."

Mr Birnie warned the growth figures could have an impact on the timing of an interest rate hike from the historic low of 0.5%.

"Notwithstanding the decision last week by the Fed Reserve to raise American interest rates, slower growth in the UK makes a hike in Bank of England rates in early 2016 less likely," he said.

Figures this week also revealed worse-than-expected borrowing in November, up by £1.3bn year-on-year to £14.2bn.

The growth revisions were unexpected, with most economists forecasting growth readings to remain unchanged.

Kallum Pickering, senior UK economist at Berenberg, said the revisions had left the economy ending the year "on a very sour note". "These changes significantly alter the quarterly growth story for 2015," he added. "Rather than a weak first quarter, a strong second quarter and an okay third quarter, disappointingly, data now show that the economy has been growing below trend all year."

But the Treasury insisted that economic performance remained "strong".

A spokesman said: "The UK was the fastest growing economy in the G7 last year. We're leading the pack with the US this year. We have a record high employment rate and the deficit is down.

"The figures highlight that risks remain - and that's why we should continue working through our plan to build an economy that delivers security for working people."

The ONS data showed that growth was hit by a weaker performance from the dominant services sector, which accounts for around three-quarters of gross domestic product.

Services output grew by 0.6% in the third quarter, against 0.7% initially estimated, according to the ONS.

This came as manufacturing output shrank by 0.4% and construction contracted by 1.9%.

Net trade was also a drag on the economy, knocking a percentage point off growth in the third quarter.

The revised figures mean the economy has grown by 6.1% above its pre-crisis peak, compared with an earlier estimate of 6.4%.

Belfast Telegraph

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