Belfast Telegraph

Northern Ireland's economy finally showing signs of sparking into life

Activity picking up, but householders won't feel it yet

BY CLARE WEIR

Northern Ireland's economy will grow at the fastest rate in seven years in 2014 but householders may have to wait to feel the benefit, says a new report.

PricewaterhouseCooper's latest Northern Ireland Economic Outlook (NIEO) study claims the economy could expand by around 1.6%, and that unemployment and inflation will also fall.

But while most economic indicators are pointing north, PwC's chief economist in Northern Ireland Dr Esmond Birnie said wage increases will continue to lag behind inflation and because of continued pressures on energy and other costs, squeezed households may not feel the direct benefits of recovery. And while the picture may be improving, we're still lagging behind the rest of the UK.

He said: "While Northern Ireland is recovering, it is not recovering as quickly as the rest of the UK regions and much of the private sector growth is being driven by a small number of manufacturing exporters, export-focused business services and modest increases in tourism and leisure.

"The message for the private sector is that preparing for recovery is as much about having adequate financial and human resources as about having markets, customers and opportunity."

The labour market has prompted reason for optimism.

The overall jobless rate peaked in February of this year and has since fallen by 7% while youth unemployment remains high, with over a fifth (22.5%) of 18-24 year-olds not in employment, education or training, compared to a UK average of 19.8%.

While the dole queue is shortening.

"Claimant count unemployment has fallen every month since the beginning of the year, redundancies are around 40% below the same period in 2012 and there are 5,320 more people in work than this time last year," he said.

And even the housing market has shown signs of life.

"As Northern Ireland still has the lowest house price to earnings ratio in the UK, there is no sign of the market overheating," he said. "Compared to the region's performance over the past four years, there is a distinct whiff of recovery in the air."

Amidst the good news, Mr Birney warned that a hike in interest rates by the Bank of England will be costly to households here.

"A 1% increase in interest rates will cost the average Northern Ireland household about £550 a year and add to the squeeze on individuals and families.

"It will also impact the cost of doing business and, combined with competitive market conditions, may trigger insolvencies as so-called 'zombie companies' are unable to compete in new markets, finance recovery or service growing levels of bank debt."

Belfast Telegraph

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