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Economic outlook is improving but clouds lie ahead

Joblessness and a flat housing market will continue to be major challenges in the New Year although the Northern Ireland economy will return to growth in 2013, according to a new report.

PricewaterhouseCooper's latest UK Economic Outlook said that Northern Ireland is forecast to grow by 1.2% in 2013, but that's lower than Scotland and Wales which are expected to grow by 1.6% and 1.5%, respectively and below the UK average of 1.8%.

Northern Ireland's September unemployment statistics showed that local unemployment had risen to 6.9% with 63,400 people claiming benefit, an increase of 200 on the previous month.

Northern Ireland's claimant count unemployment is the second highest of the 12 UK regions - up by 4.8% (2,900), over the 12 months to September, as compared to a decrease of 1.4% in the UK.

Dr Esmond Birnie, PwC's chief economist here, said: "In September, overall UK employment reached a record high of almost 30m, with unemployment falling to 7.9%, but Northern Ireland's small exporting base amongst both manufacturing and service businesses continues to constrain export-led recovery," he said

"There is evidence that some parts of the manufacturing sector are responding aggressively to difficult export markets and we have seen some good exporting news in recent months.

"However, events like the 760 job losses in FG Wilson and the difficulties in the construction sector - where over 15,000 jobs have been lost - are outweighing the gains."

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He added: "Northern Ireland's recent poor performance - where the economy is forecast to shrink by around 0.5% in 2012 - is heavily impacted by the downturn in construction, where a decline of up to 6% in the sector will have constrained economic growth.

"Our economic weather map for 2013 is mixed; some sunny spells around anticipated economic growth, but the challenge of tackling unemployment and rebalancing the economy will cast patchy cloud over recovery.

"However, the more positive national data on GDP, employment, inflation and retail sales suggests that Northern Ireland should benefit from a faster and deeper recovery elsewhere in the UK."

He added that local householders should also benefit from falling inflation which has stifled consumer spending over the past 18 months.