Slide pack, Ulster Bank Northern Ireland PMI, August 2014

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 2014 Survey Update

Issued 8th

September 2014

Richard Ramsey

Chief Economist Northern Ireland

[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 manufacturing & services output growth continues at a robust rate in August

Global Output - PMI

25

30

35

40

45

50

55

60

65

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

The EZ’s services & manufacturing sectors lose momentum with retail & construction still contracting

Eurozone PMIs: Output

25

3035

4045

50

5560

65


Composite (M&S) Manufacturing Services

Construction Retail No Change

Source: Markit Economics Expansion

Contraction

The Republic of Ireland, the US and NI posted the fastest rates of manufacturing output growth in August

PMIs: Manufacturing Output August 2014

35 40 45 50 55 60 65 70 75

DenmarkFrance

AustraliaS.Africa

IndonesiaS.Korea

SingaporePolandTurkey

ItalyVietnam

BrazilEZEU

GermanyChina

RussiaGreeceMexicoJapan

NetherlandsSpain

AustriaUK

GlobalN.Zealand*

IndiaSwitzerland

Czech RepublicCanadaTaiwan

NIUS

Ireland

Source: Markit Economics Output Indices, *July

UK, NI & RoI

€

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

PMIs: Services Output August 2014

35 40 45 50 55 60 65

BrazilAustralia

ItalyJapan

FranceRussia

IndiaEmerging Markets

EZChina

EUGermany

NIGlobalSpain

US*UK

Ireland

Source: Markit Economics Output Indices

€

German growth slowing, Italy & France contracting and Spain, Ireland & the UK posting an acceleration in growth

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

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

The UK & Chinese Composite PMIs improve in August


35

40

45

50

55

60

65

Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Eurozone US (Markit) China UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

The US recovery accelerates with Japan also reporting a quickening in manufacturing activity

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Emerging markets post their strongest rate of growth in 17 months due primarily to a pick-up in China


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets


Contraction

Expansion

Australia’s services & manufacturing sectors remain ‘Down Under’ the 50 threshold in August

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

Firms in the UK & RoI signal an acceleration in their rates of growth in output but NI’s pace of growth eases

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Aug-04 Apr-06 Dec-07 Aug-09 Apr-11 Dec-12 Aug-14

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 private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q1-Q3 2014

NI Private Sector Output Index Versus NI PMI

-6-5-4

-3-2-1012

345

2004 Q1 2005 Q3 2007 Q1 2008 Q3 2010 Q1 2011 Q3 2013 Q1 2014 Q3*

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,Q1 2014 is latest data for NICEI, * average of July & August

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

ContractionE i

NI’s recovery took hold in the second half (H2) of 2013 with all indicators improving in (H1) 2014

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

65

2007

H120

07H2

2008

H120

08H2

2009

H120

09H2

2010

H120

10H2

2011

H120

11H2

2012

H120

12H2

2013

H120

13H2

2014

H1

PMI Index

Business Activity New Orders Employment Export Orders ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI PMI

The pace of growth in employment, new orders & output amongst NI firms eased in August from its recent highs

NI Private Sector Activity3 month moving average

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment


ExpansionC

ontraction

NI order books were growing at a record rate in May but the pace of growth has eased since then

Private Sector New OrdersMonthly

30

35

40

45

50

55

60

65


NI UK RoI

Source: Markit Economics & Ulster Bank NI

Orders increasing

Orders C

ontracting

Surge in demand has led to rising backlogs of work notably within NI although rates of growth is now easing

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

NI firms post their 14th successive monthly rise in export orders in August but the pace of growth slows

NI New Export Business3 month moving average

25

30

35

40

45

50

55

60

65


Export Orders No Change


Grow

th Accelerating

Contraction A

ccelerating

PMI signals the fastest rate of jobs growth in 7 years in Q2 with the pace of job creation easing in Q3

NI Employment: PMI v QES*

35

40

45

50

55

60

2004 Q3 2006 Q3 2008 Q3 2010 Q3 2012 Q3 2014 Q3*

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* refers to average of July & August

Job creation accelerates in the RoI with the pace of employment growth easing in NI & the UK

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Output cost inflation remains subdued

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80

Aug-04 Aug-06 Aug-08 Aug-10 Aug-12 Aug-14

Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services rising

Regional Comparisons

Strong growth across all UK regions & the RoI in August

Output / Business ActivityAugust 201450 = No change

56.7

61.7

59.8

40

45

50

55

60

65

70

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

…all the UK regions & the RoI post strong rates of growth over the last 3 months…

Output / Business Activity 3 months to August 2014

50 = No change

58.559.060.6

40

45

50

55

60

65

70

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

PMI Index


Expansion

Contraction

… and over the last 12 months

Output / Business Activity12 months to August 2014

50 = No change

58.8 58.659.4

44

47

50

53

56

59

62

65

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

NI posts further job gains in August but rate of employment growth lags behind the UK and the RoI

Employment LevelsAugust 201450 = No change

55.1

57.6

53.7

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


Most UK regions (including NI) and the RoI post strong rates of employment growth over the last 3 months

Employment Levels3 months to August 2014

50 = No change

56.8

54.2

57.2

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


The RoI, London & the North West posted the sharpest rise in employment levels over the last year

Employment Levels12 Months to August 2014

50 = No change

55.7

54.1

56.4

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

UK services & construction sectors exceed expectations with growth accelerating. But manufacturing disappoints

UK Business Activity / Output - PMIs

20

30

40

50

60

70

Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of economic growth between Q2 2013 & Q2 2014 with further growth expected in Q3

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 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 average for July & August

RoI output growth accelerates within services & manufacturing but eases within the construction sector

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction No Change


Contraction

Expansion

NI’s services & construction firms reported stronger rates of growth in output in H1 2014 relative to H2 2013

NI Private Sector Business Activity (PMI)

30

35

40

45

50

55

60

65

2007

H120

07H2

2008

H120

08H2

2009

H120

09H2

2010

H120

10H2

2011

H120

11H2

2012

H120

12H2

2013

H120

13H2

2014

H1PMI Index

Manufacturing Services Construction Retail

ExpansionC

ontraction


NI’s services and construction sectors saw output accelerate in Q2 relative to Q1 but Q3 set to be weaker

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


ExpansionC

ontraction

…with all sectors reporting an easing in the rates of employment growth over the last 3 months

NI PMI - Employment Index 3 month moving average

25

30

35

40

45

50

55

60

65


Manufacturing Services Construction

Source: Markit Economics &Ulster Bank NI PMI

Job Gains

Job Losses

Local firms report strong rates of growth in output & orders. Pace of jobs growth eases from recent record high

NI Manufacturing Activity - PMI3 month moving average

25

30

35

40

45

50

55

60

65


Business activity New Orders Employment

Source: Markit Economics & Ulster Bank

Grow

th C

ontraction

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

NI & RoI post a pick-up in their manufacturing output growth rates in Q3 while the pace of growth eases in the UK

NI & the RoI post a pick-up in their manufacturing new orders growth rates in Q3

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

NI has been outperforming some of its European competitors for most of the last 12 months

Manufacturing Output - PMI

20

30

40

50

60

70


RoI Italy Spain Greece NI


Contraction

Expansion

Pricing power eases as NI manufacturing firms report the weakest output price inflation since 2012

NI Manufacturing Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

The PMI is signalling the fastest rate of manufacturing employment growth in Q1 & Q2 since the PMI began

NI Manufacturing Employment: PMI v QES*

30

35

40

45

50

55

60

65

2004 Q3 2006 Q3 2008 Q3 2010 Q3 2012 Q3 2014 Q3*

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 a slowdown in its rates of growth in output, employment & new orders in Q3

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70

Aug-03 Jun-05 Apr-07 Feb-09 Dec-10 Oct-12 Aug-14

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

UK & RoI firms report an acceleration in their rates of output growth whilst output growth for NI firms eases

Services Output (excluding Retail)3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

…but NI firms report a marked slowdown in the rate of new orders growth in Q3

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

Service sector posts its 3rd successive monthly rise in output prices in August

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

Service sector employment growth remains strong across all 3 economies with NI jobs growth easing

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

In Q2 the services PMI showed its fastest rate of jobs growth since Q4 2007. Pace of job creation eases in Q3

NI Services Employment: PMI v QES*

40

45

50

55

60

65

2004 Q3 2006 Q3 2008 Q3 2010 Q3 2012 Q3 2014 Q3*

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 report a much weaker Q3 relative to a bumper Q2 (boosted by Giro D’Italia)

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

Local retailers report an easing in rates of output cost inflation and input price inflation

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

Following Q2’s record rates of growth, NI’s construction firms report a slight easing in their rates of growth in Q3

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

…and output price inflation has eased while input cost inflation has accelerated in Q3

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70


PMI Index

Input Prices Output Prices No Change


InflationD

eflation

NI’s construction PMI posts its 5th successive quarterly rise in employment in Q3*but QES shows a fall in Q1

NI Construction Employment: PMI v QES*

20

25

30

35

40

45

50

55

60

65

2004 Q3 2007 Q1 2009 Q3 2012 Q1 2014 Q3*

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


Construction output growth remains strong in all three economies in Q3

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

NI new orders growth hits a record high in Q2 & remains strong in Q3 suggesting significant work in the pipeline

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. Housing activity has increased over the last 3 months at its fastest rate since June 1997

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Aug-05 Feb-07 Aug-08 Feb-10 Aug-11 Feb-13 Aug-14

Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

…with opportunities returning 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


ExpansionC

ontraction

50 = No change

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Slide pack, Ulster Bank Northern Ireland PMI, August 2014

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Transcript of Slide pack, Ulster Bank Northern Ireland PMI, August 2014