Post on 09-May-2015
description
16th
October 2013
Richard Ramsey
Chief Economist Northern Ireland
richard.ramsey@ulsterbankcm.com
Northern Ireland’s Economic Recovery & Challenges for the Hospitality Sector
Hospitality Exchange Business Breakfast
Ramada Plaza Hotel, Belfast
Slide 2
The hills are alive with the sound of recovery
Slide 3
A recovery is well underway in terms of output…
Business Activity - PMIs
30
40
50
60
Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
NI UK RoI
Source: Markit & Ulster Bank NI PMI
Expansion
Contraction
Slide 4
…and in terms of employment
Full-Time Annual Employment Growth Employee Jobs
-15%
-10%
-5%
0%
5%
10%
Jun-93 Dec-95 Jun-98 Dec-00 Jun-03 Dec-05 Jun-08 Dec-10 Jun-13
Y/Y
UK NI RoI
Slide 5
NI Recovery Checklist
• New Car Sales Up
• Unemploymentfalling
• Business activity up
• Mortgage activity up
• Employment up
Recovery Checklist
• Insolvencies rising
• Retail vacancies
• Disposable income
• Construction jobs
• Housing starts
• Inward migration
Slide 7Slide 7
Consumers are experiencing ‘spreadsheet recovery’
Source:
The Economist
Computer says Yes. But consumer says No!
Slide 8
But no sign of a recovery with household incomes
UK Average Weekly Earnings & CPI Inflation
1.0%
2.7%
0
1
2
3
4
5
6
Aug-01 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
%
Ave Weekly Earnings 3m Y/Y % (Excl. Bonuses) CPI Y/Y
Source: ONS
Income squeeze
Does not include taxes or changes to benefits
NICE Decade
Slide 9
If consumer says ‘No’, profitability says ‘Oh No!’ too
NI Private Sector Profit Squeeze3 Month Moving Average
30
40
50
60
70
80
Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
Output Prices Input Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI
Profits squeeze
Price of goods & services falling
What has happened to revenue & cost base since August 2007?
Average Room Rate / Rec Par 2007-2012
-14%+83%
+46%+47%
Slide 11
The boom in tourism since the Good Friday Agreement (GFA) has been matched by a boom in the cost base too
% Change in Cost Base
0% 50% 100% 150% 200% 250% 300% 350% 400%
Gas
Electricity
Heating Oil
Change since GFA (Apr-98 to Aug-2013) 10yr (Aug-03 to Aug-13) 6yr (Aug-07 to Aug-13)
Source: ONS RPI & UB Calculations
+68% +84%
+23%
+33% +42%
+41%
What has happened to food prices over the last 6 years*?
* % change between August 2007 – August 2013
Slide 13
How do you deal with falling revenue & rising costs?
Slide 14
NI enjoyed Southern Comfort in the Celtic Tiger era
WealthTrade Tourism Investment WealthWealthTradeTrade TourismTourism InvestmentInvestment
Slide 15
TradeTourism WealthInvestment
VVAT VAT
Slide 17
N/S Tourism Performance influenced by more than VAT
£ / €
CPI
NAMA
IMFAPD
Slide 18
Inflation – a tale of two economies
UK v RoI Cumulative % Change in Consumer Prices since 'Credit Crunch' began (Aug 2007 to Aug 2013)
20.7%
3.2%
0%
10%
20%
30%
40%
50%
60%
70%
Food & Non-Alcoholic
Beverages
Food ElectricityGas & Other
Fuels
TransportFuels &
Lubricants
TransportServices
All CPI
UK RoI
Slide 19
Ireland is the poster child of low inflation since the credit crunch began
EU-28 Cumulative % Rise in Food & Drink Prices August 2007 to August 2013 (HICP)
1%
36%
15%
19%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
HungaryEstonia
UKMalta
LithuaniaLatvia
PolandRomaniaSlovenia
FinlandCzech Republic
CroatiaSlovakiaBulgariaBelgiumCyprusEU 28
AustriaDenmark
LuxembourgSweden
Germany ItalyEZ
NetherlandsSpain
FranceGreece
PortugalIreland
Source: ONS & Eurostat
€
Slide 20Slide 20
Economic Growth will be an uphill challenge…
Source:
The Economist
?
Slide 21Slide 21
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