Belfast Telegraph

Friday 18 April 2014

We might have to bear this market for a while

It's said that trying to find the bottom of a bear market is a fool's game. But, when you've experienced one of the most prolonged periods of economic contraction in a lifetime, you need to do something to wash away the pessimism.

One of the first things that technical analysts – those mathematical boffins who try to predict where a market is going next by the path it has previously taken – learn is that volatility can suggest a market has peaked or has reached the bottom of a trough.

If you wanted to take an optimistic view of the UK economy today you could say that the two sets of data to the left of this column are an example of the latter.

One survey says the manufacturing sector is on its uppers while another says it's continuing to contract, a situation which smacks of the kind of mixed results you get when markets are fumbling around at the bottom of dip.

It would certainly seem that way if you look at the latest available data on the Northern Ireland manufacturing sector.

February's purchasing managers' index from Ulster Bank – which was prepared by Markit, the company which compiled the UK-wide survey on these pages – showed that Northern Ireland manufacturing climbed for the second consecutive month in February.

Granted the result for March is to be revealed but anecdotal evidence, particularly from the aerospace and pharmaceutical industries, suggest the same is true for the last four weeks.

The Chamber of Commerce survey concurs with that view on a UK-wide basis and gives the burgeoning services sector a resounding pat on the back.

Again that's an area where the Northern Ireland economy is putting in a strong showing as we gain a shining reputation as back office for the financial services industry.

But before we get too carried away we need to remember that the construction industry is still on its knees, the retail industry is having to fight harder for a smaller share of dwindling disposable income and the farming sector is not only having to deal with surging input prices but also weather more suited to the Arctic than Antrim.

These are all timely reminders that while the bear run may be coming to an end, the bull run still looks to be some way off.