guild of agricultural journalists - dnt chartered accountants · guild of agricultural journalists....
TRANSCRIPT
Guild of Agri‐Journalists Breakfast
Economic Context
23rd
April 2015
Richard RamseyChief Economist Northern [email protected]
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 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 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
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
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%
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 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: [email protected]
Twitter: @UB_Economics
Slide 34
Disclaimer
This document is issued for information purposes only for clients of Ulster Bank Group who are eligible counterparties or professional customers, and does not constitute an offer or invitation to purchase or sell any instrument or to provide any service in any jurisdiction where the required authorisation is not held. Ulster Bank and/or its associates and/or its employees may have a position or engage in transactions in any of the instruments mentioned.
The information including any opinions expressed and the pricing given, is indicative, and constitute our judgement at time of publication and are subject to change without notice. The information contained herein should not be construed as advice, and is not intended to be construed as such. This publication provides only a brief review of the complex issues discussed and readers should not rely on information contained here without seeking specific advice on matters that concern them. Ulster Bank make no representations or warranties with respect to the information and disclaim all liability for use the recipient or their advisors make of the information. Over-the-counter (OTC) derivates can involve a number of significant and complex risks which are dependent on the terms of the particular transaction and your circumstances. In the event the market has moved against the transaction you have undertaken, you may incur substantial costs if you wish to close out your position.
Ulster Bank Limited Registered Number: R733 Northern Ireland. Registered Office: 11-16 Donegall Square East, Belfast BT1 5UB.Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Member of The Royal Bank of Scotland Group.
Calls may be recorded.