NI economy expected to weaken as inflation, low consumer confidence and tighter monetary policy weigh on output
The performance of the UK and Northern Ireland economies weakened in the second quarter of 2022 when compared with the first quarter of the year and, looking forward, there are a number of headwinds that are likely to weigh on output levels. High inflation is continuing to squeeze household spending power and erode consumer confidence with the rate of price rises expected to remain elevated over the coming months. Increased prices are also putting pressure on businesses’ costs and monetary policy is tightening. In light of these challenges, we now expect the Northern Ireland economy to grow by around 4.1% in 2022 but contract by about 0.5% in 2023. It’s important to note that the economic outlook is particularly uncertain at this time and that these forecasts reflect economic data and events up to 13th October 2022.
Northern Ireland’s labour market continues to perform relatively strongly despite the challenging economic backdrop. The Quarterly Employment Survey showed that the number of employee jobs increased by 1.4% in the first quarter of the year, and by a further 0.4% in quarter two, bringing the number of jobs to a record high of 797,840. The unemployment rate for June – August 2022 was 3.0%, up 0.4 percentage points from the previous three-month period but still low by historical standards. The strong jobs growth observed so far this year underpins our view that the annual average number of employee jobs in Northern Ireland could increase by around 2.6% in 2022. However, we expect the number of jobs to fall by about 0.7% next year as demand for labour is adversely impacted by businesses facing higher costs and household spending being squeezed. We are forecasting that the unemployment rate in Northern Ireland will average around 2.9% in 2022 and 3.7% in 2023.