Mon, 23 May 2022

Northern Ireland Composite Economic Index Quarter 4 2021

Northern Ireland Executive
31 Mar 2022, 21 GMT+10

The Northern Ireland Composite Economic Index (NICEI) Quarter 4 2021 was published today by the Northern Ireland Statistics & Research Agency (NISRA).

NICEI Q4 2021 published

The key points were:

NI Economic output increased over the quarter, year, 2 year and rolling four quarters.

  • The NICEI indicates that economic output increased by 1.2% over the quarter to December 2021.  Meanwhile economic output in the year to December 2021 increased by 4.9% in real terms compared to the same period in the previous year i.e. Quarter 4 2020.

  • Where annual growth in the NICEI appears particularly strong, it is important to recognise there has been some volatility in the NICEI during the COVID pandemic.  As lockdown measures were introduced to mitigate the spread of COVID-19 and subsequently eased, this lead to the NICEI falling to a series low in Q2 2020, followed by the highest quarterly increase in the NICEI to Q3 2020.

  • As a result, it is perhaps worth considering biennial change, comparing the change over two years i.e. Quarter 4 2021 and Quarter 4 2019 (the previous Quarter 4 before the pandemic) as opposed to annual change in order to mitigate any volatility arising from the pandemic in the NICEI.    In terms of biennial change, NI economic output has increased at a slower rate (3.4%) compared to the annual change (4.9%) in the NICEI to Q4 2021.  Furthermore, in Quarter 4 2021, NI Economic Output reached a 13 year high, returning to levels of economic output last exceeded in Q2 2008.

  • The increase in the NICEI over the latest quarter (1.2%) was largely driven by increased activity in the Services sector; which had positive contributions of 0.7 percentage points (pps).  That said, all other sectors had positive contributions, with Production contributing 0.2 pps, Construction and the Public Sector both contributing 0.1 pps each.

NI Economic Activity increased at a faster rate compared to UK GDP over the 2 year and rolling annual average periods.

  • Although the measures are not produced on a fully equivalent basis, comparisons with the UK show that NI Economic Activity increased at a lower rate to UK GDP over the quarter (1.2% vs 1.3%) and the year (4.9% for NI and 6.6% for the UK). However NI output grew at a faster rate than UK GDP biennially (i.e. over 2 years, 3.4% vs 0.0%) and over the rolling annual average period i.e. the average of the most recent 4 quarters compared to the average of the previous 4 quarters (7.6% vs 7.4%).

Both the Public and Private sectors increased over the quarter, year, 2 year and rolling four quarters.

  • NI's Private sector output as measured by the NICEI increased over the quarter (1.4%), over the year (5.8%) and on a biennial basis (3.5%). Meanwhile, the NICEI Public Sector index also increased over the quarter (0.7%), over the year (2.2%) and on a biennial basis (2.9%).

  • For the Private sector, average growth for the four quarters to Quarter 4 2021 compared to the previous four quarters increased by 9.5%. Whilst the Public sector (employee jobs) index increased by 1.4% over the same period.

Commentary

  • The NICEI indicates the increase in economic growth over the quarter, year, 2 year and rolling annual average [1] to Quarter 4 2021 was largely driven by increased activity in the Services Sector

  • The Index of Services (which accounts for 53% of NI GVA) reached its series high in Q4 2021 - exceeding the previous series high achieved in the previous quarter, Q3 2021.  It is also worth noting in Q4 2021 that none of the remaining sectors of the NI economy (Production, Construction or Public Sector) made a negative contribution to NICEI growth over the quarter, biennial or rolling four quarter period.  That said, the construction sector experienced a reduction in output over the year to Q4 2021, while the remaining sectors experienced growth over the period. This lead the NICEI and Private Sector Component Indices to reach a 13 year high in Q3 2021, returning to levels of output last exceeded in Q2 2008

  • There has been a general relaxing of restrictions from Q2 2021 through to Q1 2022 (albeit with some restrictions re-introduced at the end of Q4 2021). Economic activity had increased gradually in recent years (2013-2019) following the prolonged downturn post 2007.  Recently the NICEI and Private Sector Component Indices have recovered from their respective series lows in Q2 2020 (which coincided with a period of strict lockdown restrictions) and have returned to levels of economic output last exceeded in Q2 2008.

  • While not fully equivalent, the NICEI estimates of output in NI and the ONS estimates of UK GDP show that both economies increased over the quarter by 1.2% for NI and 1.3% for the UK.  NI economic output increased at a slower rate than the UK over the year at a rate of 4.9% for NI and 6.6% for UK.  Conversely, NI economic output fared better than the UK in terms of biennial growth (Quarter 4 2021 vs Quarter 4 2019) increasing by 3.4% whilst the UK showed no growth. Over the rolling annual average, (comparing the last four quarters to the previous four quarters) NI grew at a faster rate than the UK, increasing by 7.6% whilst the UK grew by 7.4%.

  • The level of economic activity in NI currently sits 1.1% below the maximum value recorded in Quarter 2 2007 whilst UK GDP is estimated to be 15.4% above its pre-economic downturn peak.

[1] The average of the most recent 4 quarters compared to the average of the previous 4 quarters.

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