slide pack, ulster bank northern ireland pmi, february 2015

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

Includes analysis of Global, Eurozone, UK, UK Regions, NI &

Republic of Ireland economic performance by sector

February 2015 Survey Update

Issued 9th

March 2015

Richard Ramsey Chief Economist Northern Ireland

www.ulstereconomix.com [email protected]

Twitter @UB_Economics

mailto:[email protected]

PMI SurveysPurchasing Managers’

Indexes (PMIs) are monthly surveys of private sector companies

which provide an advance indication of what is happening in the private sector economy

by tracking variables such as output, new orders, employment and

prices across different

sectors.

Index numbers are calculated from the percentages of respondents

reporting an

improvement, no change or decline on the previous month. These indices vary from 0 to

100 with readings of 50.0 signalling no change on the previous month. Readings above

50.0 signal an increase or improvement; readings below 50.0 signal a decline or

deterioration. The greater the divergence from 50.0 the greater

the rate of change

(expansion or contraction). The indices are seasonally adjusted

to take into consideration

expected variations for the time of year, such as summer shutdowns or holidays.

< 50.0 = Contraction 50.0 = No Change > 50.0 = Expansion

Data at a sector level are more volatile and 3‐month moving averages

have been used to

more accurately identify the broad trends.

Global output growth for both manufacturing and services picks up in February to a 5-month high

Global Output - PMI

25

30

35

40

45

50

55

60

65

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

EZ manufacturing & service sector growth picks up with retail & construction still in contraction mode

Eurozone PMIs: Output

25

30

35

40

45

50

55

60

65


Composite (M&S) Manufacturing Services

Construction Retail No Change

Source: Markit Economics Expansion

Contraction

The Eurozone’s composite PMI signals economic growth rate rising in Q1 2015

EZ GDP versus EZ Composite PMIComposite excludes construction

2025303540455055606570

2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1*

PMI Index

-3-2.5-2-1.5-1-0.500.511.52

GDP % Q/Q

GDP Q/Q PMI

Source: Bloomberg & Markit Economics, * Q1 = Jan & Feb

EZ Q4-14 GDP 0.3%

RoI posts the fastest rate of growth in February followed by the US with the UK in the top five performers

PMIs: Manufacturing Output February 2015

35 40 45 50 55 60 65 70 75

AustraliaS.Africa

IndonesiaTurkeyFrance

SwitzerlandN.Zealand*

CanadaGreece

BrazilSingapore

AustriaNI

RussiaChina

EZGermanyS.Korea

IndiaVietnamTaiwan

EUGlobalJapan

NetherlandsItaly

SpainMexico

DenmarkUK

Czech RepublicPoland

USIreland

Source: Markit Economics Output Indices, *January

RoI, UK & NI

€

The Republic of Ireland, US & the UK posted the fastest rates of service sector output growth in February

PMIs: Services Output February 2015

35 40 45 50 55 60 65

RussiaNI

JapanItaly

AustraliaEmerging Markets

ChinaBrazil

FranceEU

IndiaEZ

GlobalDeveloped Markets

GermanySpain

UKUS*

Ireland

Source: Markit Economics Output Indices

€

Top 4 Eurozone economies simultaneously growing for the first time in 10 months

Composite PMIs (Manufacturing & Services ** Excludes Construction**)

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

US, EZ & China Composite PMIs posted a pick up in their rates of growth in February. Japan saw growth rate ease


30

35

40

45

50

55

60

65

Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15

Eurozone US (Markit) China Japan UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

The US ISM points to a significant slowdown in manufacturing activity in recent months

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Diverging performance within Emerging Markets with India & Brazil growing & Russia’s recession deepening


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets


Contraction

Expansion

Australia’s services & manufacturing sectors on both sides of the 50 threshold in February

Australia - PMI

30

35

40

45

50

55

60

65

Feb-07 Feb-09 Feb-11 Feb-13 Feb-15

Manufacturing Services No Change


Contraction

Expansion

NI records its 3rd consecutive month of contraction as it continues to diverge from the UK & RoI

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Feb-03 Feb-05 Feb-07 Feb-09 Feb-11 Feb-13 Feb-15

NI UK RoI

Source: Markit & Ulster Bank NI PMI50 = threshold between expansion / contraction

ExpansionC

ontraction

**PMI Surveys Exclude Agriculture & Public Sector**

PMI suggests growth in DFP’s private sector composite index (combines indices for construction, services, agriculture & industrial production) throughout 2014

NI Private Sector Output Index Versus NI PMI

-6-5-4

-3-2-1012

345

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1*

NICEI Q/Q%

30

35

40

45

50

55

60

65

PMI NICEI Left Hand Scale PMI Right Hand Scale

Source: DFP NI Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI,Q2 2014 is latest data for NICEI. *Q1 refers to average of January & February

50 mark is the threshold for expansion / contraction with PMI Expansion

ContractionE i

2014 was the first year in 7 years that business activity, new orders, employment & export orders all expanded

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

2007 2008 2009 2010 2011 2012 2013 2014

PMI Index

Business Activity New Orders Employment Export Orders ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI

NI’s recovery took hold in H2 of 2013 with all indicators improving in H1 2014 but easing in H2 2014

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

65

2006

H220

07H1

2007

H220

08H1

2008

H220

09H1

2009

H220

10H1

2010

H220

11H1

2011

H220

12H1

2012

H220

13H1

2013

H220

14H1

2014

H2

PMI Index

Business Activity New Orders Employment Export Orders

ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI PMI

NI has started 2015 on a negative note with output contracting and new orders broadly flat

NI Private Sector ActivityMonthly

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment


ExpansionC

ontraction

Incoming orders for NI firms slump in H2 with January & February 2015 broadly flat

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65


NI UK RoI


Orders increasing

Orders C

ontracting

Backlogs of work continue to grow in the UK & RoI but NI posts a 5th month of contraction as activity slows

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

Export orders flat or falling in each of the last 4 months

NI New Export BusinessMonthly

20

30

40

50

60

70


New Export Orders No Change


Expansion

Contraction

PMI signals the fastest rate of jobs growth in 7 years in Q2 with the pace of job creation easing sharply since

NI Employment: PMI v QES**

35

40

45

50

55

60

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1*

PMI Index

-1.5%

-1.3%

-1.0%

-0.8%

-0.5%

-0.3%

0.0%

0.3%

0.5%

0.8%

1.0%Q/Q

PMI Employment Index No Change QES Q/Q

**QES is DFP's official Quarterly Employment Survey of the number of jobs in NI & includes public sector

Discontinuity in QES Series

Job Losses

Job gains

Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction. *Q1 refers to average of January & February

Job creation accelerates in February for all 3 economies with NI rebounding after January’s contraction

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Inflationary pressures continue to ease with output prices falling

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80


Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services falling

Regional Comparisons

NI was the only UK region to see a contraction in output in February

Output / Business ActivityFebruary 201550 = No change

48.8

50.2

60.5

57.0

40

45

50

55

60

65

Lon WM Y&H SE UK Wal NW East SW EM NE Scot NI RoI

PMI Index

ExpansionC

ontraction


Most of the UK regions & the RoI posted strong rates of growth but NI remains at the foot of regional league table

Output / Business Activity 3 months to February 2015

50 = No change

56.5

60.7

48.9

40

45

50

55

60

65

Lon WM Wal SE East UK SW Y&H NW NE EM Scot NI RoI

PMI Index


Expansion

Contraction

The RoI reported the fastest rate of growth in business activity over the last 12 months & Scotland the slowest

Output / Business Activity12 months to February 2015

50 = No change

55.5

57.9

60.3

44

47

50

53

56

59

62

65

Lon Wal NE SE East WM UK EM Y&H NW SW NI Scot RoI

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

Employment on the rise again in NI after January’s decline. RoI continues to report the strongest rates of growth

Employment LevelsFebruary 2015

50 = No change59.4

52.8

56.8

46

48

50

52

54

56

58

60

WM East SE Lon NW UK EM Y&H Wal SW NE NI Scot RoI

PMI Index

IncreasingD

ecreasing


NI & Scotland post the weakest rates of job creation within the UK over the last 3 months

Employment Levels3 months to January 2015

50 = No change

56.2

50.8

59.2

46

48

50

52

54

56

58

60

East WM Lon UK NW SE Y&H Wal SW EM NE Scot NI RoI

PMI Index

IncreasingD

ecreasing


Scotland, the North East & NI posted the weakest rates of jobs growth over the last year with the RoI the strongest

Employment Levels 12 months to February 2015

50 = No change

56

57.9

53.4

46

48

50

52

54

56

58

60

East Y&H NW UK Lon WM SE EM SW Wal NI Scot NE RoI

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

UK manufacturing & construction sectors report an acceleration in output growth in February

UK Business Activity / Output - PMIs

20

30

40

50

60

70

Feb-05 Feb-07 Feb-09 Feb-11 Feb-13 Feb-15

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of economic growth between Q1- 13 & Q3-14. Growth eased in Q4 but picks up in Q1-15

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1*

PMI Index

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5GDP Q/Q

GDP Q/Q PMI PMI No Change

Source: ONS & Markit Economics, *Q1 = average of January & February

RoI output growth across all sectors but a marked slowdown in the pace of growth in construction output

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction No Change


Contraction

Expansion

All sector’s experienced weaker growth in the second half of the year relative to H1-14

NI Private Sector Business Activity (PMI)

30

35

40

45

50

55

60

65

2006

H220

07H1

2007

H220

08H1

2008

H220

09H1

2009

H220

10H1

2010

H220

11H1

2011

H220

12H1

2012

H220

13H1

2013

H220

14H1

2014

H2

PMI Index

Manufacturing Services Construction Retail ExpansionC

ontraction


All sectors experienced a rapid slowdown in output growth in H2 with services outperforming the other sectors

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


Expansion

Contraction

Services & construction firms reporting reasonable rates of employment growth with manufacturing flat

NI PMI - Employment Index 3 month moving average

25

30

35

40

45

50

55

60

65


Manufacturing Services Construction


Job Gains

Job Losses

Manufacturing firms report a sharp slowdown in Q4-14 with signs of stabilisation in Q1-15

NI Manufacturing Activity - PMI3 month moving average

25

30

35

40

45

50

55

60

65


Business activity New Orders Employment


Grow

th C

ontraction

RoI firms continue to post strong rates of growth in output while NI firms reporting output is broadly flat

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Slowdown in new orders growth is most marked amongst NI manufacturing firms

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Until recently, NI had been outperforming most of its European competitors. But is now mid-table

Manufacturing Output - PMI

NI

20

30

40

50

60

70


RoI Italy Spain Greece NI France


C

ontractionExpansion

Input cost inflation remains at a 6-year low. Output prices have fallen in 8 of the last 10 months

NI Manufacturing Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

PMI signals a moderation in manufacturing employment growth in H2-14 & Q1-15 following record high in Q2

NI Manufacturing Employment: PMI v QES**

30

35

40

45

50

55

60

65

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1*

PMI Index

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Q/Q



Job Losses

Job gains**QES is DFP's official Quarterly Employment Survey of the number of jobs in NI firms


Service sector experiences its first fall (monthly) in orders & output in Feb-15 but jobs growth at 7-mth high

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70


Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

RoI firms maintain strong rates of output growth but NI firms post their 1st monthly fall in 20 months in February

Services Output (excluding Retail)3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI firms reported their first decline (monthly) in 20 months in February

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI’s services firms still reporting input cost inflation but output prices have fallen in 9 of the last 13 months

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

UK, RoI and NI firms all reporting a pick-up in service sector employment growth over the 3 months to Feb-15

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

Pace of job creation within the services sector eased in H2-14 but has picked up in Q1-15

NI Services Employment: PMI v QES**

40

45

50

55

60

65

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1*

PMI Index

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Q/Q



Job losses

Job gains**QES is DFP's official Quarterly Employment Survey of the number of

jobs in NI and includes the public sector


NI retailers starting 2015 the way 2014 ended with output & orders contracting at a rapid rate

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

Local retailers report heavy discounting with output prices falling at rates seen in mid-2009

NI Retail Input & Output Inflation3 month moving average

30

40

50

60

70

80

90


Input Costs Output Prices No Change

InflationD

eflation

Source: Markit Economics & Ulster Bank NI Profits squeeze

Since Q2-14’s record rates of growth, NI’s construction firms report a significant easing in their rates of growth

NI Construction PMI3 month moving average

20

30

40

50

60

70


Output New Orders Employment

Source: Markit Economics, Ulster Bank PMI

ExpansionC

ontraction

50 = No change

Input cost inflation remains high but construction firms are at least still able to raise their prices

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70

Mar-09 May-10 Jul-11 Sep-12 Nov-13 Jan-15

PMI IndexInput Prices Output Prices No Change

Source: Markit Economics & Ulster Bank

InflationD

eflation

NI’s construction PMI posts jobs growth since Q3 2013 but this is largely due to NI firms working outside of NI

NI Construction Employment: PMI v QES**

20

25

30

35

40

45

50

55

60

65

2005 Q1 2007 Q3 2010 Q1 2012 Q3 2015 Q1*

PMI Index

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

Q/Q



Job losses

Job gains**QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms


Strong rates of output growth amongst UK & RoI firms with NI firms reporting growth albeit at a weaker rate

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

NI orders growth continues to ease from recent record high with RoI growth slowing too. UK firms see growth stabilise

Construction Sector New Orders - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

Opportunities for NI firms. However, civil engineering activity has slowed in recent months

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Feb-05 Feb-07 Feb-09 Feb-11 Feb-13 Feb-15

Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

…with opportunities within the RoI too

Republic of Ireland Construction Activity - PMI3 month moving average

20

30

40

50

60

70


Housing Activity Commercial Activity Engineering Activity

Source: Markit Economics & Ulster Bank

ExpansionC

ontraction

50 = No change

Disclaimer

This document is intended for clients of Ulster Bank Limited and Ulster Bank Ireland Limited (together and separately, "Ulster Bank")

and is not intended for any other person.

It 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 recipients 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.

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slide pack, ulster bank northern ireland pmi, february 2015

Business

manufacturing output

global output growth

services output

rates of growth

bloomberg markit economics

fastest rate of growth

ez gdp

month highglobal output