23rd November 2013 Richard Ramsey

Chief Economist Northern Ireland

richard.ramsey@ulsterbankcm.com

DUP Conference La Mon Country Club

Slide 2

The hills are alive with the sound of recovery

Slide 3

A recovery is well underway in terms of output

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13

NI UK RoI

Source: Markit & Ulster Bank NI PMI

Expansio

n C

ontra

ctio

n

Slide 4

Slide 6

But no sign of a recovery with household incomes

UK Average Weekly Earnings & CPI InflationAnnual % Change

0.8%

2.2%

0

1

2

3

4

5

6

Oct-01 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13

%

Average Weekly Earnings CPI Inflation

Income

squeeze

Does not include taxes

or changes to benefits

'NICE'

Decade

Slide 7

The cumulative impact of inflation has been severe

Cumulative % Change in UK Consumer Prices since 'Credit Crunch' began (Aug 07 to Oct 13)

11.0%

21.2%

0%

10%

20%

30%

40%

50%

60%

70%

Electricity

Gas & Other

Fuels

Transport

Services

Transport

Fuels &

Lubricants

Food Total CPI Average

Earnings

+68% +84%

+23%

+33% +42%

+41%

What has happened to food prices over the last 6 years*?

* % change between August 2007 – August 2013

+77%

+47% +84%

What has happened to energy prices over the last 6 years*?

* % change between Aug-07 – Sept-13 (Oct-13 for petrol / diesel)

+35% /

40%

Slide 10

Consumer behaviours are changing…

Slide 11

…prepayment has become more popular

% of Electricity Customers Paying via prepayment

0

5

10

15

20

25

30

35

40

2005Q3 2007Q1 2008Q3 2010Q1 2011Q3 2013Q1

%

NI UK

Source: DECC

Slide 12 Slide 12

Budgeting has become more difficult for Government too but at least it can always borrow…

£602 bn*

* Source: OBR March 2013 refers to 2011/12 to 2017/18

Slide 13 Slide 13

UK Public Sector Net Debt

0

250

500

750

1000

1250

1500

1750

2000

2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18

£Bn

Source: ONS, OBR March 2013

One Trillion Pounds of Debt

1.5 Trillion Pounds of Debt

But given where the public finances are heading changing behaviours is unavoidable

Slide 14

Households & Government face common challenges

An economic recovery is underway

But a recovery in the household & public finances remains a long way off

Government, like households, is having to change behaviour to adapt to the new reality

Slide 15 Slide 15

Out of every crisis springs opportunity

“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty”.

Winston Churchill

Slide 16 Slide 16

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