The document summarizes a presentation given by Richard Ramsey, Chief Economist at Ulster Bank, at the DUP Conference on November 23rd, 2013. It discusses how an economic recovery is underway in Northern Ireland and the UK based on output and business activity indicators, but household incomes and public finances have not recovered due to high inflation over the past 6 years, particularly in food and energy prices. It argues that both government and households need to change behaviors to adapt to fiscal and economic realities, and that opportunities exist within difficulties.

1. DUP Conference
La Mon Country Club
23rd November 2013
Richard Ramsey
Chief Economist Northern Ireland
richard.ramsey@ulsterbankcm.com

2. The hills are alive with the sound of recovery
Slide 2

3. A recovery is well underway in terms of output
Private Sector Business Activity - PMIs
65
NI
UK
RoI
Expansion
60
55
50
Contraction
45
40
35
Source: Markit & Ulster Bank NI PMI
30
Oct-04
Apr-06
Oct-07
Apr-09
Oct-10
Apr-12
Oct-13
Slide 3

4. Slide 4

6. But no sign of a recovery with household incomes
%
UK Average Weekly Earnings & CPI Inflation
Annual % Change
6
Average Weekly Earnings
CPI Inflation
5
4
3
Income
squeeze
'NICE'
Decade
2
2.2%
1
0
Oct-01
Does not include taxes
or changes to benefits
Oct-03
Oct-05
Oct-07
Oct-09
Oct-11
0.8%
Oct-13
Slide 6

7. The cumulative impact of inflation has been severe
Cumulative % Change in UK Consumer Prices
since 'Credit Crunch' began (Aug 07 to Oct 13)
70%
60%
50%
40%
30%
21.2%
20%
11.0%
10%
0%
Electricity
Gas & Other
Fuels
Transport
Services
Transport
Fuels &
Lubricants
Food
Total CPI
Average
Earnings
Slide 7

8. What has happened to food prices over the last 6 years*?
+68%
+23%
+33%
+84%
+41%
+42%
* % change between August 2007 – August 2013

9. What has happened to energy prices over the last 6 years*?
+35% /
40%
+47%
+77%
+84%
* % change between Aug-07 – Sept-13 (Oct-13 for petrol / diesel)

10. Consumer behaviours are changing…
Slide 10

11. …prepayment has become more popular
%
% of Electricity Customers Paying via prepayment
40
NI
UK
35
30
25
20
15
10
5
Source: DECC
0
2005Q3
2007Q1
2008Q3
2010Q1
2011Q3
2013Q1
Slide 11

12. Budgeting has become more difficult for Government
too but at least it can always borrow…
£602 bn*
* Source: OBR March 2013 refers to 2011/12 to 2017/18
Slide 12

13. But given where the public finances are heading
changing behaviours is unavoidable
£Bn
UK Public Sector Net Debt
2000
Source: ONS, OBR March 2013
1750
1500
1.5 Trillion Pounds of Debt
1250
One Trillion Pounds of Debt
1000
750
500
250
0
2001-02 2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16 2017-18
Slide 13

14. Households & Government face common challenges
 An economic recovery is underway
 But a recovery in the household & public finances remains
a long way off
 Government, like households, is having to change
behaviour to adapt to the new reality
Slide 14

15. Out of every crisis springs opportunity
“A pessimist sees the difficulty in every opportunity; an
optimist sees the opportunity in every difficulty”.
Winston Churchill
Slide 15

16. Disclaimer
This document is issued for information purposes only for clients of Ulster Bank Group who are eligible counterparties or professional
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where the required authorisation is not held. Ulster Bank and/or its associates and/or its employees may have a position or engage in
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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
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Slide 16