Exactly how much signficance is there in a weak quarter one economy reading?
The economy remains something of a puzzle at the moment. Despite Brexit, fractious global trade relations, poor productivity performance and an endless stream of gloomy predictions, employment continues to rise and confidence surveys still point to growth.
Ireland is in the midst of a growth spurt that has brought words like overheating back into conversation. Admittedly, growth in NI remains very sluggish and debt fuelled by low interest rates are masking underlying weakness but, nevertheless, it is a better position in mid-2018 than might realistically have been expected.
Updating of our EY Economic Eye forecast models takes place in late May/early June and the most difficult call to make is how much weight to put into the weak quarter one readings? The headline UK GDP number has been dismissed as a function of the cold snap, but that seems unlikely to fully explain the 0.1% figure.
Closer to home, the quarter one InterTradeIreland Business Monitor recorded a significant increase in the number of firms in stabilisation mode and a marked slow-down in employment intentions. One quarter is not enough to signal a trend but it does add weight to the cooling narrative.
At a macro level, the continued reliance on consumers to drive the UK economy remains my number one risk for the UK (and NI). I have long predicted this would eventually weigh negatively on UK growth, though very low interest rates have pushed back that day of reckoning.
A handover of the growth baton to business (or government) from consumers is necessary to facilitate continued UK growth. There seems little sign of this happening at present and it is here that Brexit may well be starting to bite. UK business investment has been low for a protracted period - indeed one of the reasons for high employment and low productivity is likely to be an underinvestment in new equipment and IT by firms. The current uncertainty surrounding Brexit may well be holding back much needed investment.
Forecasting models of the type used in Economic Eye do not use sentiment indicators and, therefore, I do not directly feed back the boardroom 'mood' when making predictions. This is fortunate as this only adds to the puzzle. Almost universally the refrain is finding, training and acquiring talent is the number one challenge faced by firms (North and South, though rising costs are clamouring for air time in the Republic of Ireland). It is true that the boardrooms in which I am presenting are not a representative sample of all firms. They are typically large, global firms, most of whom are enjoying the improved level of global growth. Even in tough times, the best firms are remarkably adaptable and see opportunities where others see challenge. 62% of our Entrepreneur of the Year Alumni see an opportunity in Brexit. That is not to say three fifths would have chosen Brexit, but they see a way to turn it to their advantage. Almost every firm that has undergone Brexit analysis, be it of their tax structures, their tariff exposure or reviewed their IT systems, has found something of benefit.
Rarely has the effort been wasted, even if the ability to make any firm decisions is compromised by the continued lack of clarity. That uncertainty provides a further challenge in the forecasting war room!
Ultimately, an assumption must be made over the final outcome of the negotiations. At present, a free trade agreement is built into our forecasts, given that is the stated aim of both sides of the negotiations, but that cannot be said with any sense of confidence.
Once again I was privileged to be given the opportunity to say a few words at the Belfast Telegraph Business Awards in partnership with Ulster Bank this year and, as always, it was a wonderful occasion.
I fill the slot usually occupied by an Economy Minster so I suppose I could say that is one, very small, upside at a personal level from the Executive hiatus.
It is not the occasion for listing worries and complaining, but rather a time to look at the wonderful businesses that have succeeded across all parts of Northern Ireland and in all sectors.
The winners, indeed all finalists, deserve great credit and almost all that I spoke to were focussed on growth and doing more in the year ahead.
They were not ignoring the risks but assessing them and pushing ahead with business decisions. An economist might seem an odd choice for such an evening but hopefully I reflected the good in the local economy.
I remain very concerned about the consumer dependence in Northern Ireland, and I am equally worried that Ireland does not need effectively zero interest rates at this time and that a period of overheating is under way.
However, I am convinced that there are plenty of great businesses that will continue to grow, win awards, find new markets and do extraordinary things.