23 April 2015

Guild of Agricultural JournalistsBreakfast Briefing

Guild of Agri‐Journalists Breakfast

Economic Context

23rd

April 2015

Richard RamseyChief Economist Northern Irelandrichard.ramsey@ulsterbankcm.com

www.ulstereconomix.com

@UB_Economics

Unemployment fell to a 6-year low of 5.7% (Q4)

Employee jobs +1.9% y/y (Full-time +1.7%)

Residential property transactions +22% y/y

FTB mortgage activity at an 8-year high

Housing starts rebound from 36-year low

New car sales +9% y/y

Estimated economic growth (GVA) 2.0% (in real terms)

2014 NI economic performance

Slide 4

Driving test downturn appears to have turned a corner

N.Ireland Private Car Driving Tests Conducted

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

75,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: DVA

2014 Performance

Total income from farming (TIFF) -17.4% y/y (real terms)

Gross output of NI agriculture -3.1% y/y

Gross value added (GVA) -4.2% y/y

Farm Business Income (FBI) -27% y/y in 2014/15

Total agricultural labour force +0.1% y/y (flat at 47,900)

Agri, Agri, Agri…….Ouch, Ouch, Ouch

Slide 6

Brent Crude oil price down 43% ($) year-on-year

Price of Brent Crude Oil in Dollars & SterlingWeekly

£41

£32.5

$62

0

20

40

60

80

100

120

140

160

Apr-93 Dec-96 Aug-00 Apr-04 Dec-07 Aug-11 Apr-15

£/$ pb

£pb $pb

Source: Bloomberg

Slide 7

Commodities slump not just an oil story…

Bloomberg Commodities Index Hits a 13-year low

80

100

120

140

160

180

200

220

240

260

Apr-01 Apr-03 Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15

Source: Bloomberg (BCOM Index)

-27% y/y

Slide 8

Sheikh v Shale v Putin

Source: The Economist 6th December

Slide 9

US Frackers responding by cutting back supply…..

Baker Hughes US Oil Rotary Rig Count

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15

Source: Bloomberg, Tickers BAKETOT Index & BAKEOIL Index

-54%

Slide 10

Milk quotas were introduced in 1984 now abolished. Increased supply from milk sheikhs?

Slide 11

Agricultural inflation tracks the oil price

Agriculture Inflation versus Oil Price

0

100

200

300

400

500

600

700

Sep-88 Feb-93 Jul-97 Dec-01 May-06 Oct-10 Apr-15

S&P Index

0

20

40

60

80

100

120

140

160

$

S&P Agriculture Index Oil Price $

Source: Bloomberg, Brent Crude Oil Price & S&P Agriculture Inflation

Slide 12

Wheat price is back where it was 8 years ago

Global Agricultural InflationRebased January 2007 = 100

0

50

100

150

200

250

300

Jan-07 Dec-07 Nov-08 Oct-09 Sep-10 Aug-11 Jul-12 Jun-13 May-14 Apr-15

Index

Agriculture Wheat Cattle

Source: S&P GSCI Agriculture Index rebased to January 2007 = 100

Slide 13

Food prices falling at a record rate

UK Food Price Inflation (CPI)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

*

Y/Y

Source: ONS, * March 2015

Ulster Fry Inflation hits a 3‐year low

ULSTER FRY DEFLATION -3.1% y/y

Ulster Fry Inflation hits a 3‐year low

Health Warning: An Ulster Fry should be eaten in moderation

+3.2%

-15.5%

-12.8%

-4.3%

-3.5%

0%

-9.2%

-6.4%

-1.0%

-2.2%

Source: ONS & UB Calculations

Slide 16

Diesel £10-16 cheaper per fill this year

UK Tank of Diesel Prices

£58.5

£88.8

£72£78.7

£118

£95.0

£91.4

£138

£111

40

60

80

100

120

140

160

Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15

£

Diesel Toyota Hilux / Nissan Navarra 80L Toyota Land Cruiser 93L

Source: DECC & UB Calculations

Slide 17

Key currency issue is one of ongoing dollar strength

US Dollar Index

70

80

90

100

110

120

130

Apr-01 Apr-03 Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15

Source: Bloomberg

24% appreciation

24%

Slide 18

Sterling’s effective exchange rate peaked last summer

Sterling Effective Exchange Rate (Trade Weighted Index)

89

92

70

75

80

85

90

95

100

105

110

Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13 Apr-15

Index

30% Depreciation

Source: Bloomberg, BoE January 2005=100

+4%

Bank of England Bank Rate hits a record low of 0.5%

5th March 2009

Slide 19

UK exports to the US becoming more price competitive

Sterling / Dollar Exchange Rate

1.2

1.4

1.5

1.7

1.8

2.0

2.1

2.3

Apr-06

Apr-07

Apr-08

Apr-09

Apr-10

Apr-11

Apr-12

Apr-13

Apr-14

Apr-15

$2007/08

$2.01 2008/09$1.71

2009/10$1.60 2010/11

$1.56

Source: Bloomberg

2012/13$1.58

2013/14$1.59

2011/12$1.60

2014/15$1.61

Slide 20

But Eurozone & the RoI even more price competitive!

EURUSD Exchange Rate(US dollars per Euro)

1.07

Mar-031.0525

0.8272 Record Low 25th October 2000

1.0482

0.70.80.9

11.11.21.31.41.51.61.7

Apr-00 Oct-02 Apr-05 Oct-07 Apr-10 Oct-12 Apr-15

$

Source: Bloomberg

Beneficiaries from a weak €uro

Show me the recovery

Slide 23

Sterling recently hit a 7-year high versus the euro

The AgriwrightMateus Rose Index

The AgriwrightMateus Rose Index

Sterling / Euro Exchange Rate

1.0

1.1

1.2

1.3

1.4

1.5

1.6

Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15

€

Source: Bloomberg

2009/10€1.13

2008/09€1.20

2007/08€1.42

2010/11€1.18 2011/12

€1.16 2013/14

€1.19

2012/13 €1.23

2014/15 €1.28

Golf Handicap

Golf Handicap

Slide 24

SFP in 2015 likely to be lowest amount in > than a decade

Single Farm Payments to NI Farmers

200

225

250

275

300

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

£m

?

Source: DARD Euro = 91.6p

Euro = 83.6p

Euro = 77.9p

Euro = 70p ish

Slide 25

Food, Drink & Tobacco sector has outperformed other sectors

Northern Ireland's Manufacturing Sales

9.6

4

6

8

10

12

2003/04 2005/06 2007/08 2009/10 2011/12 2013/14

£bn FDT Sales Non-FDT Sales

Source: DFP MSES, figures in constant prices

Slide 26

Exchange rate + Decline in Non-FDT sales = > FDT share

FDT's Share of NI Manufacturing Sales Within Markets

53%

37%28.5%

13%

0%

10%

20%

30%

40%

50%

60%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

FDT as % of Total Sales FDT as % of Total Exports

Source: DFP MSES

Slide 27

FDT has increased its share of NI sales across all markets

FDT's Share of NI Manufacturing Sales Within Markets

54%

31%

71%

54%

23%

58%

18%

27%

14%

5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

NI GB RoI Rest of the EU RoWSource: DFP MSES

Slide 28

FDT has bucked the wider trend across all markets

NI Manufacturing Sales in Constant Prices % Change 2008/09 -2013/14

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Exports RoI NI TotalSales

External GB Rest ofEU

%

FDT Non-FDT

Source: DFP MSES

RoW FDT +497%RoW Non-FDT -7%

Political risks in NI, UK, EZ & beyond

Slide 30

Source: The Economist 18th April 2015

Is this the Finn end of the wedge of the next phase of the EZ crisis?

Slide 31

Plenty of scope for political surprises in 2015

Source: 

The Economist

Brexit£ / €

Slide 32

CAP Reform

Inflation & Interest Rates

€urozoneCrisis

Outlook positive notwithstanding risks & challenges

Strong Demand

?

Brexit

£ / €

TTIP

Slide 33Slide 33

CONTACT DETAILS

Our new blog is available at www.ulstereconomix.com

Please send us a mail at:

email: richard.ramsey@ulsterbankcm.com

Twitter: @UB_Economics

Slide 34

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