North’s services sector back in growth mode in third quarter

Manufacturing output in decline again, while ESRI downgrades forecast for Republic’s economy

(Daenin Arnee/Getty Images/iStockphoto)

THE north’s services sector returned to growth over the summer, expanding by 1.5% between by the second and third quarters of 2023, the latest official data suggests.

Output in the sector, which accounts for around 55% of all Northern Ireland businesses, was 3.5% higher than the same quarter last year, according to the Northern Ireland Statistics and Research Agency (Nisra).

Services, which covers a broad range of businesses from hospitality and retail to finance and IT, is now performing 8% above pre-pandemic levels.

But it wasn’t all good news for services firms, with Nisra assessing that output in the retail sector declined 0.9% in the third quarter.

While output in retail is 3.6% up over the year, it was still 5% below pre-pandemic levels.

A significant contributor to the return to growth in the services sector was the performance of the business services and finance sub-sector, which grew by 4% in the third quarter, leaving it 11% higher than a year earlier.

But the latest data published by Nisra suggested a weaker performance for other areas of the private sector.

The Index of Production, which largely measures output in the north’s manufacturing sector, suggested output fell by 2.1% in the third quarter, leaving it 4.1% down over the year.

Ulster Bank’s chief economist Richard Ramsey said it marked the third successive quarter of decline for manufacturing in the north.

He said manufacturing output in the third quarter was at its lowest level in 13 quarters.

But there was wide variation between sub-sectors.

The index suggests the pharma and chemicals sector continued its post-pandemic decline, while areas like transport and machinery continued to grow through all three quarters of 2023 to date.

ESRI downgrades forecast for the Republic’s economy

Meanwhile, an Irish think tank has further downgraded its forecast for growth in the Republic’s economy this year.

The latest quarterly economic commentary from the Economic and Social Research and Institute (ESRI), forecast the Republic’s economy, as measured by GDP (growth domestic product), will shrink by 2.7% this year before bouncing back next year.

But the think tank said the Republic’s economy may be performing better than headline GDP figures suggest.

The activities of multinationals, and the major contribution they make to corporation tax revenues, has traditionally resulted in overstated growth.

But analysis by ESRI suggests the opposite may now be happening.