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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