ulster bank pmi slide pack

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

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

Republic of Ireland economic performance by sector

August 2013 Survey Update

Issued 9th

September 2013

Richard Ramsey

Chief Economist Northern Ireland

[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 accelerates in August…

Global Output - PMI

25

30

35

40

45

50

55

60

65

Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

… with both manufacturing & services sectors posting growth in the Eurozone

Eurozone PMIs: Output

25

30

35

40

45

50

55

60

65

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

Composite (M&S) Manufacturing Services Construction

Source: Markit Economics Output Indices Expansion

Contraction

Top performers within manufacturing incl. US, Denmark, UK & NI. Underperformers incl. BRICs /Asia, Greece & Australia

PMIs: Manufacturing Output August 2013

35 40 45 50 55 60 65 70

S.KoreaAustralia

IndiaIndonesia

FranceGreece

VietnamTaiwan

BrazilSingapore

RussiaChina

MexicoTurkey

CanadaSpainIsrael*IrelandGlobal

SwitzerlandEZ

JapanAustria

ItalyEU

GermanyNetherlands

CzechPoland

NIS.Africa

N.Zealand*UKUS

Denmark

Source: Markit Economics Output Indices, *July, for the US ISM is used.

UK, NI & RoI

€

The US, UK & Ireland post the fastest rate of service sector output growth in August

€

PMIs: Services Output August 2013

35 40 45 50 55 60 65

AustraliaIndiaItaly

FranceBrazilSpain

EZEmerging Markets

JapanRussia

GermanyChina

EUGlobal

NIUK

IrelandUS*

Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services

€

http://www.see-and-do-france.com/images/French_flag_design.jpg

Three of the four largest economies within the eurozone are now expanding

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

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

Acceleration in growth for the US, UK, China & the Eurozone


35

40

45

50

55

60

65

Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13

Eurozone US (ISM) China UK

Source: Markit Economics PMIs, US includes construction

ExpansionC

ontraction

All major economies posting an improvement in August

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13

US (ISM) China Japan Eurozone


Contraction

Expansion

But outside of China, Russia is the only one of the BRIC economies in expansion mode (> 50.0)


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets No Change


Contraction

Expansion

… with a strong Aussie $ and a slowdown in Asia is pushing Australia ‘Down Under’ too

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

NI, UK & the RoI all post strong rates of growth in August. NI firms record their fastest rate of growth since March 2007

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13

NI UK RoI

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

Expansion

Contraction

**PMI Surveys Exclude Agriculture & Public Sector**

PMI suggests growth in DFP’s new private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q2/Q3 2013

NI Private Sector Output Index Versus NI PMI

-6-5-4

-3-2-1012

345

2003 Q1 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3*

PSO Q/Q%

30

35

40

45

50

55

60

65

PMI NICEI Left Hand Scale PMI Right Hand Scale

Source: New DFP Northern Ireland Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI , * average for June & July

50 mark is the threshold for expansion / contraction with PMI

Expansion

ContractionE i

NI firms report an increase in business activity, new orders & employment over the last 3 months

NI Private Sector Activity3 month moving average

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment

Source: Markit Economics & Ulster Bank NI

ExpansionC

ontraction

Forward looking indicators suggest more growth in all three economies in the months ahead

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65

Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13

NI UK RoI

Source: Markit Economics & Ulster Bank NI PMI

Orders increasing

Orders C

ontracting

Surge in demand is leading to backlogs of work in NI & the UK

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60

Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13

NI UK RoI


Increasing D

ecreasing

NI firms post the first increase in export orders since October 2007

NI New Export BusinessMonthly

20

25

30

35

40

45

50

55

60

65

Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13

New Export Orders No Change


Grow

th AcceleratingC

ontraction Accelerating

PMI underestimated job gains in 2012 (relative to official jobs survey). PMI signals a return to employment growth in Q3 2013

NI Employment: PMI v QES*

35

40

45

50

55

60

Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13*

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

Discontinuity in QES Series

Job losses

Job gains

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

Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages except * average of July & August

Firms within the UK, RoI & NI all post strong employment gains in August

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60

Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

NI UK RoI


Job Gains

Job Losses

Private sector’s profitability squeeze eases

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

PMIs experience a heatwave in August with strong growth reported everywhere…

Output / Business ActivityAugust 201350 = No change

60.7

58.457.2

40

45

50

55

60

65

70

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

PMI index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

… all the UK regions post growth over the last 3 months

Output / Business Activity 3 months to August 2013

50 = No change

54.8 55.0

58.8

40

45

50

55

60

65

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

PMI Index


Expansion

Contraction

…but NI is the only UK region to post a decline in output over the last 12 months

Output / Business Activity 12 months to August 2013

50 = No change

53.1 52.9

48.3

40

45

50

55

60

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

PMI index

ExpansionC

ontraction


All the UK regions and the Republic of Ireland post employment growth in August …

Employment LevelsAugust 201350 = No change

51.850.9

53.6

44

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasing


… and over the last 3 months to August

Employment LevelsLast 3 months to August 2013

50 = No change

52.3

50.3

54.1

44

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasing


NI posts the steepest decline in employment & RoI the sharpest rise over the last 12 months

Employment Levels12 months to August 2013

50 = No change

50.7

52.3

48.5

42

44

46

48

50

52

54

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

PMI Index

IncreasingD

ecreasing


Sectoral Comparisons

All three broad UK sectors witness a marked acceleration in output growth in August

UK Business Activity / Output - PMIs

20

30

40

50

60

70


Services Manufacturing Construction


ExpansionC

ontraction

UK economic growth accelerates in Q2 & Q3

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3*

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, * refers to July & August

RoI’s services sectors an acceleration in output growth while construction remains sub-50 – but only just

RoI Business Activity - PMIs3 month moving average

20

25

30

35

40

45

50

55

60

65


Manufacturing Services Construction No Change


ExpansionC

ontraction

All three broad sectors reported increased levels of business activity in the 3 months to August 2013…

NI Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65


Manufacturing Services Construction


Expansion

Contraction

…with all sectors reporting job gains over the last 3 months

NI PMI - Employment Index 3 month moving average

25

30

35

40

45

50

55

60

65

Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

Manufacturing Services Construction


Job Gains

Job Losses

NI’s manufacturing sector posts an acceleration in business growth & new orders over the last 3 months

NI Manufacturing Activity3 month moving average

25

30

35

40

45

50

55

60

65


Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

The UK, RoI and NI all witness an acceleration in manufacturing output during the last 3 months

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

The UK posts the strongest growth in new orders

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

N.Ireland is outperforming its European competitors

Manufacturing Output - PMI

20

30

40

50

60

70


RoI Italy Spain Greece NI


Contraction

Expansion

Cost price inflation remains for local manufacturing firms but pricing power is returning

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 job gains in Q1 2013 followed by a fall in in Q2 2013 and another rise in Q3

NI Manufacturing Employment: PMI v QES*

30

35

40

45

50

55

60

65


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


Recent growth in NI service sector output / orders is feeding through into higher levels of employment…

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

In July, all three economies post output growth for the first time since 2007. Growth accelerates in August…

Services Output 3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

… and strong new orders growth in the same three economies

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI’s services sector sees inflationary pressures ease

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

…with employment levels picking up in July & August in N.Ireland

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

The services PMI finally shows employment growth after 5 years of decline

NI Services Employment: PMI v QES*

40

45

50

55

60

65


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


Retailers experience a retail boom in July & August

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

Profits squeeze on local retailers eases significantly due to increased pricing power

NI Retail Input & Output Inflation3 month moving average

30

40

50

60

70

80

90


Input Costs Output Prices No Change

InflationD

eflation


Profits squeeze

NI construction sector still reports growth in output and orders. But employment dips in August

NI Construction PMI3 month moving average

20

30

40

50

60

Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13

Output New Orders Employment

Source: Markit Economics, Ulster Bank PMI

ExpansionC

ontraction

50 = No change

…but the profits squeeze continues

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70


PMI IndexInput Prices Output Prices No Change

Source: Markit Economics & Ulster Bank PMI

InflationD

eflation

NI PMI has been a reasonably good predictor of actual job losses in the official employment surveys (QES)

NI Construction Employment: PMI v QES

20

25

30

35

40

45

50

55

60

65


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


UK (59.1) & NI (51.9) construction sectors post healthy rates of growth in August. With RoI almost flat (49.7)

Construction Sector Output - PMI3 month moving average

20

30

40

50

60


PMI Index

NI UK RoI


ExpansionC

ontraction

New orders in the UK & NI have been rising over the last 3 months but NI posts a dip in August (47.5)

Construction Sector New Orders - PMI3 month moving average

20

30

40

50

60


PMI Index

NI UK RoI


ExpansionC

ontraction

Growth opportunities for NI firms within GB market particularly within the house building sector…

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

…but fewer opportunities in the RoI, with civil engineering remaining particularly weak

Republic of Ireland Construction Activity - PMI3 month moving average

20

30

40

50

60

70

Feb-07 Mar-08 Apr-09 May-10 Jun-11 Jul-12 Aug-13

Housing Activity Commercial Activity Engineering Activity

Source: Markit Economics & Ulster Bank

ExpansionC

ontraction

50 = No change

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ulster bank pmi slide pack

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