Monthly update: 5 October 2015 Danske Bank Chief Economist, Twitter: angela_mcgowan www.danskebank.co.uk/ec Local job and investment announcements during September 2015 Over the month of September there were very 263 new job announcements in the local economy; this compares to 1,458 announced in September 2014. Over the last month a number of local companies also announced new export contracts and investments with the support of Invest NI (see below). Local Labour Market Employment: The number of persons in employment in Northern Ireland decreased by 12,000 over the latest quarter bringing it to 815,000. The current level is up 5,000 since last year. NI Unemployment Quarterly Measure: Seasonally adjusted unemployment rate, as measured by the Labour Force Survey (LFS), was estimated at 6.2% for the period May-July 2015. This was up 0.1 percentage points over the quarter and down by 0.4 percentage points over the year Monthly claimants: The more recent seasonally adjusted claimant count stood at 42,000 (4.7 % of the workforce) during August 2015, down 1,000 from the previous month s revised figure and down 10,400 over the year.. NI Long-term unemployment 58% of all claimants have been unemployed for a year or more. Page 1
Unemployment: Long term trend NI and UK (May-July) United Kingdom UK Labour Market: Employment: The UK employment rate (the proportion of people aged from 16 to 64 who were in work) was 73.5% in May- July. During this period there were 22.74 million people working full-time, 361,000 more than for a year earlier. There were 8.36 million people working part-time, 52,000 more than for a year earlier. The chart below shows that the lowest employment rate in the UK since ONS records began was 65.6% in 1983, during the economic downturn of the early 1980s. The employment rate has been generally increasing since early 2012 and for the latest time period, May to July 2015, it reached a joint record high of 73.5%. Data Source: ONS Page 2
UK ILO Unemployment: The UK unemployment rate was 5.5% in May-July 2015, unchanged from the previous quarter but down from 6.2% one year ago. There were 1.82 million unemployed people (people not in work but seeking and available to work), 10,000 more than for February-April 2015 but 198,000 fewer than for a year earlier. The chart below shows that the lowest unemployment rate recorded since comparable ONS records began in 1971 was 3.4% in late 1973 to early 1974 and the highest rate, of 11.9%, was recorded in 1984 during the downturn of the early 1980s. The unemployment rate for the latest time period, May to July 2015, was 5.5%. Data Source: ONS UK Inflation: UK CPI inflation fell back to 0% y/y in August, from 0.1% y/y in July. A smaller rise in clothing prices on the month compared with a year ago was the main contributor to the slight fall in the rate. There were also downward effects from changes in motor fuel prices and sea fares but rising prices for soft drinks and for furniture and furnishings partially offset the fall. UK Productivity: Last week the ONS reported UK Labour Productivity has finally risen above its pre-crisis level. Productivity as measured by output per hour grew by 0.9% from the first to the second quarter of 2015 to the highest level ever recorded for the ONS series. The ONS reported that output per hour in services grew strongly in Quarter 2 to a record high, but manufacturing output per hour fell by 0.5% on the quarter, continuing the exceptionally weak trend for this series since the economic downturn. Importantly, whole economy unit labour costs grew 2.2% on the same quarter last year, the fastest rate since Quarter 4 2012. This reflects an upward shift in the costs of labour as reflected in earnings growth and other wider indicators; the rise in labour costs will be of interest to the Bank of England in forming their interest rate decisions in the months ahead. UK Wage Growth: Comparing Quarter May-July 2015 with a year earlier, pay for employees in Great Britain increased by 2.9%. UK Retail Sales: According to the ONS, year-on-year estimates of the quantity bought in the retail industry grew for the 29th consecutive month in August 2015, increasing by 3.7% compared with August 2014. In terms of value (amount spent), retail sales rose 0.2 per cent on a year earlier. Page 3
Global picture The latest data out of the US suggests that the dip in world trade stemming from the EM crisis is also starting to weigh on growth. Advance trade data for August showed a 3.2% decline in goods exports over the month driven by a plunge in industrial supplies an autos. New export orders also declined to the lowest level since the peak of the euro debt crisis in 2012. September s weak manufacturing data increases the risk that the Fed will once again postpone the first rate hike. European PMIs released over the month of September show that the European expansion in manufacturing is slowing. PMIs dropped to 52 from 52.3 Despite signs of resilient domestic demand, the details also indicate that the manufacturing PMI will decline further going forward as the order-inventory balance weakened in September due to a rise in stocks of finished goods. The service PMI was weaker than expected but remained at a high level of 54.0. For services the future business expectations continued its downtrend to 60.5 from a peak at 64.8 in February. On the other hand, the incoming new business index remained around a high level of 54.0. Although the PMIs were better than expected, they confirm Danske Bank s expectation that Q3 GDP growth in Europe was the weakest for five quarters. Official PMI manufacturing for September was slightly better than expected, rising to 49.8 from 49.7 in August (consensus: 49.7). The new orders index rose from 49.7 to 50.2. Hence, while still at a low level, the official PMI points to tentative signs of bottoming. This brings slight relief following the sharp decline in the nonofficial Caixin index. Commodity exporters like Brazil and Russia are still feeling a big hit and, in addition, many emerging market countries struggle with political unrest not least Brazil having a major corruption scandal running, adding a political crisis to the economic challenges. Brazil s GDP is expected to fall 2% this year, the worst performance in decades. In the short term, a risk factor for these markets is a further decline in commodity prices, which would add pressure. While we expect oil prices to bottom and rise gradually from here, the near-term picture is highly uncertain and a further decline cannot be ruled out. Page 4
Key statistics GDP [latest qoq] UK Q2 (+0.7%) Ireland Q1 (+1.4) Euro area Q2 (+0.3%) Inflation ( yoy) UK +0 % (Aug) Ireland 0% (Aug) Euro Area -0.1% (Sept) Unemployment UK 5.5% NI 6.2 % Ireland 9.4 % (Sept) Euro area 10.9% (July) Employment NI 67.8% UK 73.5% Key interest rates UK BoE 0.5% ECB 0. 05% US Fed 0.25% Equity markets FTSE-100 6,061 / Dow Jones 16,021 (2/Oct/15) 3pm Currency markets / = 1. 346 (74.2p) /$ = 1.5199 (65.78p) (2/Oct/15) 3pm Commodities Brent Crude $47.39 Gold Spot $1137 (2/Oct/15) 3pm Contact List For economic research reports please visit: e.mail : anmcg@danskebank.co.uk Issued by Northern Bank Limited trading as Danske Bank (the Bank or We ). So far as the law or regulation allow, We disclaim any warranty or representation as to the accuracy or reliability of the information and statements in this commentary. We will not be liable for any loss or damage suffered from relying on this commentary. This commentary does not purport to contain all relevant information. Recipients should not rely on its contents but should make their own assessment and seek professional advice relevant to their circumstances. We may have proprietary positions in the products described in this commentary. This commentary is for information purposes only, is not intended as an offer or solicitation, nor is it the intention of the Bank to create legal relations on the basis of the information contained in it. No part of this commentary may be reproduced without our prior permission. Danske Bank is a trading name of Northern Bank Limited which is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Credit facilities other than regulated mortgages are not regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in Northern Ireland (registered number R568). Registered Office: Donegall Square West Belfast BT1 6JS. Northern Bank Limited is a member of the Danske Bank Group. Page 5