- Written by John Campbell
- BBC News NI Economics and Business Editor
There was a lot of positivity at the Northern Ireland Investment Summit but the economy is showing signs of weakness
When delegates from the Northern Ireland Investment Conference arrived at Hillsborough Castle on Wednesday evening, there was an autumnal feel.
Rain fell from the dark sky and a gusty wind blew across the square.
Data released this week suggest that Northern Ireland’s economy is also slowing.
The services sector is the dominant part of this economy and has accounted for most of the growth since the pandemic.
In the first quarter of this year, the sector grew strongly and production reached a record level.
The services sector has a very broad range of activities and the decline was not noticeable across the board – for example, business services were still a strong performer.
Family finances are facing more pressure
In fact, the weakness was concentrated only in the largest sub-sector: retail and hospitality.
The slowdown in these areas is not surprising, given that they rely heavily on discretionary spending from consumers who are under inflationary pressures.
The data covers the months of April, May and June when inflation reached 8.7%, 8.7% and 7.9% respectively.
The optimistic case is that consumer spending may recover slightly as the inflation rate slows.
However, rising interest rates will gradually affect more and more mortgage payers, leaving their personal finances under pressure.
Image source, Getty Images
The services sector covers a wide range of activities including retail, hospitality and business services
Labor market data also indicates that the economy is starting to calm down.
The labor market has recovered very strongly since the Covid pandemic.
On the eve of the first lockdown in March 2020, there were about 754,000 people on the company’s payroll, and that number fell to less than 737,000 by the end of the year.
Since then, it has been one of growth and the number of salaried employees stood at just over 791,000 in August.
This was marginally lower than in July, which by itself would not be enough to indicate a turnaround in the labor market.
Is the economy facing a harsh winter?
But other data also turned negative: The quarterly employment survey of about 6,000 companies showed the first quarterly decline in employee payrolls after two years of growth.
The number of people claiming unemployment benefits in August rose 0.4% to 36,700.
The overall unemployment rate from May to June also showed an increase to 2.7% from 2.4% in the previous quarter.
The employment rate, which measures the percentage of working-age adults in a job, also declined during the quarter, down from 72.4% to 71.1%.
This week also saw Ulster Bank’s regular business survey, known as the Purchasing Managers’ Index, which can give a good idea of where the official data is heading.
Despite the data, it didn’t look like a gloomy week: The investment conference was a pep rally for the business community.
Advertisements unrelated to the conference also show confidence in some companies.
But with no sign of the pressure on household budgets ending and energy prices continuing to rise, it could be another tough winter.