Danske Bank March 2015 Economic Update, Monthly update: April 2nd 2015 Danske Bank Chief Economist, Twitter: angela_mcgowan www.danskebank.co.uk/economy Northern Ireland Job Creation & Investments Jobs and Investment NI: Following the January and February new job announcement figures of 685 and 555 respectively, March was a little softer when it came to job creation - with only 214 new jobs announced. However, there were a number of announcments around new export contracts as shown in the Table below. P a g e |1 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, Local Labour Market: NI Unemployment Quarterly Measure: Seasonally adjusted unemployment rate, as measured by the Labour Force Survey (LFS), was estimated at 6% for the period November 2014 - January 2015.. This was down 0.3 percentage points over the quarter and down by 1.5 percentage points over the year. Monthly claimants: The more recent seasonally adjusted claimant count stood at 46,200 (5.2%) at February 2015, down 1,700 from the previous month’s revised figure. This is the 26th consecutive month in which there has been a fall in this measure of unemployment (18,600 over the period). Long-term unemployment is rising – 63.1% of the unemployed have been unemployed for a year or more (up 14.2 percentage points over the year). NI Youth unemployment: The unemployment rate for 18-24 year olds was 19.5% - down 2.9 percentage points over the year. P a g e |2 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, Danske Quarterly Sectoral Forecast Report Q1 2015 During the month of March, Danske Bank published an updated GVA forecast for the local economy and the various sectors. The local economy is now expected to grow at 2.2% during 2015 as low inflation provides a boost to households and private demand. P a g e |3 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, United Kingdom: Labour Market: The Office of National Statistics (ONS) reported in January that the UK unemployment rate remained at 5.7% during the November - January 2015 period. In the same period, the employment rate rose to 73.3% of the working age population. Employment rose by 617,000 year on year and was up by 143,000 over the latest quarter. UK House Prices – On March 24th 2015, the Office of National Statistics reported house prices rose across the UK by 8.4% on average in the year to January 2015. Regional variations were as follows: 8.5% in England, 4.9% in Wales, 7.8% in Scotland and 7.3% in Northern Ireland. In London prices rose by 13%, when London and the South East are removed from the data, house prices increased by 6.5% on average. Average mix-adjusted house prices in January 2015 stood at £285,000 in England, £174,000 in Wales, £142,000 in Northern Ireland and £198,000 in Scotland. P a g e |4 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, Inflation: During the month of February, the headline rate of annual inflation dropped to 0.0% moving the UK closer to deflationary territory. Core inflation which excludes food, energy alcohol and tobacco rose over the year by 1.2%. This latest decline in the headline rate of inflation does not surprise the Bank of England (BoE), as it was forecast in the Bank’s latest Inflation Report from February. The fall is attributed to declining international energy and food prices, which should begin to fall out of inflation at the end of this year. The negative reading has prompted some readjustment in markets with regard to the timing and even the direction of UK interest rates. However the BoE Governor Mr Mark Carney may not sway as easily as markets when it comes to the future path on monetary policy. Earlier this month he was reported to have said it would be “extremely foolish” to cut rates or expand quantitative easing in response to falling oil prices unless lower inflation was hurting wage growth, consumer spending and business investment. Source: ONS, Feb 2015 and various issues UK Retail Sales – In February 2015, the quantity bought in the retail industry increased by 5.7% compared with February 2014 while the amount spent (value) increased by 2.2%. Online sales accounted for 11.6% of all retail sales in February. P a g e |5 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, Global picture At the March FOMC meeting, Yellen downplayed the importance of higher wage inflation, saying that it is not a pre-condition for raising the Fed funds rate. Nevertheless, markets will pay close attention to the average hourly earnings component in the employment report. Wage inflation in the US is still subdued and Danske Bank expects to see a pick-up soon, as the labour market improvement advances. Unemployment still sits at 5.5%. After years and years with bad headlines Europe is now the main provider of good news. Growth is surprising to the upside, our models are the most upbeat since 2009, consumers are finally spending money and monetary policy is adding lots of fuel. Not surprisingly, asset markets are booming. The flash estimate for China's HSBC/Markit manufacturing PMI in March declined by more than expected to 49.2 from a final reading of 50.7 in February. This is the lowest level for the HSBC/Markit manufacturing PMI since April 2014. The details on balance were also weak, with new orders declining markedly to 49.3 from 51.2, while the export orders component improved slightly to 49.0 from 48.5 but remained relatively subdued. The poor PMI, in line with recent sluggish hard data, also confirms that the start to 2015 has been very weak. The data so far suggests that GDP growth could decline below 7.0% y/y in Q1 from 7.3% y/y in Q4 last year. The ECB is easing monetary policy, which on its own is stimulating Central and Eastern European (CEE) growth through an export channel and at the same time the CEE central banks is moving towards further monetary easing, which is directly stimulating CEE domestic demand. This is good news for the CEE fixed income and equity markets particularly and for the CEE economies in general. As a result, we are becoming more upbeat on the outlook for growth in Poland, Hungary and the Czech Republic. P a g e |6 www.danskebank.co.uk/economy Danske Bank March 2015 Economic Update, Key statistics GDP [latest qoq] UK Q4 (+05%) Ireland Q4 +0.2 Inflation ( yoy) UK 0.0% (Feb) Ireland -0.5% (Feb) Unemployment UK 5.7% NI 6.0 % Employment NI 67.7% Key interest rates Equity markets Currency markets Commodities Euro area Q3 (+0.2%) Euro Area -0.3% (Feb) Ireland 10.1% (Feb) Euro area 11.4% (Dec) UK 73.3% UK BoE 0.5% ECB 0. 05% US Fed 0.25% FTSE-100 6817 / Dow Jones 17,698 £/€ = 1. 3675 (73.1p) Brent Crude $56.63 (02/04/15) 11:30 am £/$ = 1..4798 (67.6p) Gold Spot $1205 (02/04/15) 11:30 am (02/04/15) 11:30 am Contact List For economic research reports please visit: www.danskebank.co.uk/economy 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. 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