What's in Store for 2013?

Dr Brian Sloan, Chief Economist at Greater Manchester Chamber of Commerce

Chamber Chief Economist, Dr Brian Sloan, gives his predictions for the year ahead.

“Next year the economy nationally will see weak growth with expectations of 1% probably about hitting the mark, but further out the Office of Budget Responsibility is far too optimistic. The consequences for Greater Manchester in this environment will continue to be mixed depending on the sector and area of the region in which the business is based. Overall there are reasons to be cautiously optimistic for the economy of Greater Manchester, though this will require faith in the early part of 2013.

“The beginning of the year is going to see inflation moving beyond 3% as a result of food price rises and as energy price increases from all providers become fully included in the data. Although this is taking several months to come fully through, the reality is that many households are already experiencing inflation in excess of 3%, when typical pay rises are less than 2%. The lift in retail sales, gradually upward over the last few quarters will subside again in the early part of 2013, putting further pressure on retailers and the high street. Retail spend on the internet this December will pass 10% of all sales for the first time in this month, further adding to this pressure despite total retail spending in the North West of about £4.25bn in December. We should not be surprised to see another major high street retail failure early in the New Year.

“Employment numbers and unemployment data in Greater Manchester for the New Year are unlikely to boost confidence as temporary workers are released after Christmas and then in the Spring public sector job losses add downward pressure to the numbers. Much will depend on external trading conditions with the Eurozone, US and emerging markets. The Eurozone and US currently pose risks to our growth for different reasons, but the solution at present to both is political and that brings with it the fear of irrational decision making. Our expectations are that the Eurozone will continue to make slow progress towards the resolution of its debt crisis, though austerity will continue to weaken growth until at least 2014, however the US is likely to reach agreement before the fiscal cliff in January averting wider damage to the world’s economy and our own.

“A pick up in emerging markets would also see commodity price rises, so is therefore a double edged sword, however India has revised down its own growth forecasts and China is looking to secure more sustainable levels of growth. Overseas demand therefore is unlikely to pick up considerably in 2013 though this will keep the lid on a further damaging increase in inflation. The result will mean there should be a pickup in retail demand in the latter half of the year, with some pickup in export demand.

“Business investment will help growth also towards the end of the year and there are some infrastructure projects underway or about to start, supporting the construction sector into 2013. More should have been done to support the region’s infrastructure investment to encourage business investment. The concern is that London and the South East’s dominant economic position is being reinforced by further investment from the Autumn Statement and welfare cuts in those areas with higher than average levels of worklessness and benefit claimants; we must address issues of welfare dependency but we will not do it without access to work. 2013 will be a difficult year to try and balance these issues with current Government policy and thinking. However there is investment coming in Liverpool’s Superport, Port Salford and Airport City, with Northern Hub still further out in 2014 but rail electrification has begun. These are positive steps and could be game changers for the region, though we still need to compete with the South East.”