While the economy is on the turn, and a positive economic growth is set to return as the recession falters, Northern Bank economist Angela McGowan confirmed today that the construction trade is still faltering.

The latest 'Quarterly Sectoral Forecasts' report published by Northern Bank, revealed that the local economy stopped contracting in the third quarter of 2009 and is forecast to experience positive - albeit very weak - growth of 0.9% in Quarter Four.

Despite the risk of a slight dip in economic activity in the first quarter of 2010, Northern Bank forecasts economic growth to be a modest 1.2% in 2010, reflecting an upward revision since its last report.

The report indicates that business services will be a key growth area for Northern Ireland over the next couple of years.

Ms McGowan (pictured) said: "Our quarterly estimates show that Northern Ireland has pulled out of recession in the second half of 2009.

"The current improvement in the local economy is primarily being driven by a number of factors including the combination of monetary and fiscal intervention, improved confidence as the global economy recovers, the seasonal impact on household demand as well as a favourable exchange rate.

"It should be noted that while Northern Ireland may have technically come out of recession, overall economic activity levels are still weak," she insisted.

She said that the construction sector is still expected to shed jobs in 2010 (estimated to be a further 6% between now and Quarter Four next year).

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Also, construction and housing-related sectors such as Mining and Quarrying will continue to reel from the impact of the local housing crash.

Construction is however expected to return to positive growth from early 2011 onwards as the housing market picks up.

Local manufacturing will continue to build on its Quarter Three recovery, growing by 0.5% again, however construction-related manufacturing continues to suffer.

Meanwhile, the report reveals that the majority of sectors in Northern Ireland should return to positive growth in the last quarter of this year.

The Christmas period will provide support to retail, hospitality and some manufacturing sub-sectors such as food processing, although housing related sectors such as construction, building products and legal, particularly conveyancing, have still not returned to positive growth.

Business services is forecast to do particularly well as the recovery takes hold next year, with year on year growth expected to reach 3.6% at the end of next year.

The sector includes a wide-range of activities from accountancy and marketing right through to labour recruitment and call centres.

Ms McGowan explained: "The business services sector took a sharp hit during the recession as companies pulled back on expenditure and the housing related elements of the sector namely estate agents and legal services suffered as a result of the housing market correction.

"As the recovery takes hold we expect the business services sector to be a key driver from the middle of next year onwards as the concentration of skills and diverse nature of the sector gives it greater reach than other areas of the economy."

Ms McGowan believes sustainability of the recovery will depend upon a number of factors. She explained: "Sustainability of the local recovery will depend upon stability returning to the local labour market. We expect a peak in unemployment in Northern Ireland in the second quarter of next year – after that, if confidence takes hold, there is a lot of built-up demand that could be unleashed.

"Quite simply, labour market stability allows households to be less cautious with regard to expenditure. Confidence in public finances is also important for investor confidence, so government plans for fiscal control will play a key role in the recovery process."

Ms McGowan believes Northern Ireland's long term recovery is dependent upon Northern Ireland developing a strong export-orientated private sector.

She concluded: "Having survived the worst of the recession with the support of the public sector, that life line will gradually weaken from 2011 onwards.

"We need to focus on building up the private sector and in particular our export base."

Northern Bank's sectoral analysis is published on a quarterly basis providing a continuous assessment of the performance of key sectors in the Northern Ireland economy.

See: Construction Weak, But Recession Over

(BMcC/KMcA)