northern ireland pmi slide pack, december 2012

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

December 2012 Survey Update

Issued 14th January 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 records its highest reading in 9 months with manufacturing posting its 2nd successive month of growth

Global Output - PMI

25

30

35

40

45

50

55

60

65

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Total Manufacturing Services

Source: Markit Economics ExpansionC

ontraction

All sectors within the Eurozone are still contracting

Eurozone PMIs: Output

25

30

35

40

45

50

55

60

65

Dec-07 Oct-08 Aug-09 Jun-10 Apr-11 Feb-12 Dec-12

Whole Economy Manufacturing Services Construction

Source: Markit Economics Output Indices Expansion

Contraction

Greece, Australia & Spain post steepest falls in manufacturing output. Mexico & India post strongest gains

PMIs: Manufacturing Output December 2012

35 40 45 50 55 60 65

GreeceAustralia

SpainFrance

Czech RepublicJapan

South AfricaNI

ItalyEZ

SingaporeGermany

EUPolandAustria

N.ZealandIsrael

CanadaS.Korea

NetherlandsVietnamTaiwan

SwitzerlandGlobalRussiaIrelandChina

IndonesiaBrazil

DenmarkUK

TurkeyUS

IndiaMexico

Source: Markit Economics Output Indices

NI, RoI & UK

Services output expanding for BRICs, US, Germany, Japan & Ireland. EZ, UK, NI & Australia all posting contractions

PMIs: Services Output December 2012

35 40 45 50 55 60 65 70 75

NIAustralia

SpainFrance

ItalyEZEUUK

ChinaJapan

GermanyEmerging Markets

GlobalIndia

IrelandRussia

US*Brazil

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

€

Republic of Ireland & the UK still outperforming their European competitors in December

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

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

US remains the best performer relative to China, UK & EZ

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

35

40

45

50

55

60

65

Apr-08 Dec-08 Aug-09 Apr-10 Dec-10 Aug-11 Apr-12 Dec-12

Eurozone US (ISM) China UK

Source: Markit Economics

Contraction

Expansion

… but Chinese manufacturing is expanding at a faster rate than the US

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Apr-08 Dec-08 Aug-09 Apr-10 Dec-10 Aug-11 Apr-12 Dec-12

US (ISM) China Japan Eurozone


Contraction

Expansion

UK just below expansion threshold whilst the rate of contraction remains steep for Northern Ireland

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

NI UK RoI

Source: Markit & Ulster Bank NI PMI: 50 = threshold between expansion / contraction

Expansion

Contraction

**PMI Surveys Exclude Agriculture & Public Sector**

PMI suggests further falls in private sector composite index (combines DFP indices for construction, services and industrial production) in Q3 & Q4 2012

NI Private Sector Output Index Versus NI PMI

-5

-4

-3

-2

-1

0

1

2

3

4

5

2003 Q4 2005 Q2 2006 Q4 2008 Q2 2009 Q4 2011 Q2 2012 Q4

PSO Q/Q%

30

35

40

45

50

55

60

65PMI

UB PSO Left Hand Scale UB PMI Right Hand Scale

Source: Ulster Bank Private Sector Output (Index 2008 = 100) up to Q2 2012 & Markit Economics

50 mark is the threshold for expansion / contraction with PMI

Expansion

Contraction

NI output, new orders and employment all contracting 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 PMI

ExpansionC

ontraction

Pace of contraction in NI new orders remains steep with UK flat

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65


NI UK RoI


Orders increasing

Orders C

ontracting

NI’s levels of work outstanding still falling at a rapid rate

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

Export orders have been falling since February 2008

NI New Export BusinessMonthly

20

25

30

35

40

45

50

55

60

65


New Export Orders No Change


Grow

th Accelerating

Contraction A

ccelerating

PMI underestimated job gains in Q2 & Q3 (relative to official Quarterly Employment Survey – QES) further job losses signalled in Q4 2012

NI Employment: PMI v QES*

35

40

45

50

55

60

Dec-03 Jun-05 Dec-06 Jun-08 Dec-09 Jun-11 Dec-12

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

Northern Ireland’s rate of decline in employment levels eases sharply in December while the RoI posts jobs growth

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60

Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

NI UK RoI


Job Gains

Job Losses

Input cost inflation remains a problem with output prices and charges still 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

4 UK regions post a contraction in December with Northern Ireland posting the steepest decline…

Output / Business ActivityDecember 2012

50 = No change

44.8

49.9

52.9

35

40

45

50

55

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

PMI index

ExpansionC

ontraction


NI posts sharpest rate of decline over the last 3 months…

Output / Business Activity 3 months to December 2012

50 = No change

42.3

49.9

53.6

40

42

44

46

48

50

52

54

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

PMI Index


Expansion

Contraction

……and over the last 12 months

Output / Business Activity 2012

50 = No change

51.951.1

43.6

40

45

50

55

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

PMI index

ExpansionC

ontraction


After the North West, Northern Ireland posts the steepest decline in employment over the last month …

Employment LevelsDecember 2012

50 = No change

49.8

52.2

47.9

42

44

46

48

50

52

54

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

PMI Index

IncreasingD

ecreasing


…and steepest decline over the last 3 months…

Employment LevelsLast 3 months to December 2012

50 = No change

49.4

46.8

52.2

42

44

46

48

50

52

54

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

PMI index

IncreasingD

ecreasing


…and over the last 12 months

Employment Levels2012

50 = No change

50.5 50.3

47

42

44

46

48

50

52

54

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

PMI index

IncreasingD

ecreasing


Sectoral Comparisons

UK manufacturing output shoots above the 50 expansion threshold but services & construction fall below it

UK Business Activity / Output - PMIs

20

30

40

50

60

70


Services Manufacturing Construction


ExpansionC

ontraction

UK composite PMI raises the prospect of negative GDP Q4 reading

UK GDP versus UK Composite PMI

25

30

35

40

45

50

55

60

65

2007 Q3 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4

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

Services & manufacturing are above 50 in the RoI

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 sectors in NI contracting….

NI Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65


Manufacturing Services Construction

Source: Markit Economics & Ulster Bank NI

Expansion

Contraction

… with services and construction sectors still reporting falling employment levels

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 posts employment and new orders growth in Q4 2012

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

NI & UK manufacturing performance is diverging whilst the RoI continues to outperform

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

All 3 economies post growth in new orders for the first time since April 2011

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

N.Ireland manufacturing lagging economies elsewhere

Manufacturing Output - PMI3 month moving average

20

30

40

50

60

70


China Germany US NI UK

Source: Markit Economics PMIs

Contraction

Expansion

Ireland outperforming its Eurozone partners & NI

Manufacturing Output - PMI

20

30

40

50

60

70


RoI Italy Spain Greece NI

Source: Markit Economics PMIs, NI is 3 month moving average

Contraction

Expansion

Cost price inflation accelerating for local manufacturing firms & pricing power still falling = profits squeeze

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 no major manufacturing job losses in Q3 and Q4 but FG Wilson announcement still to take effect

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

RoI growth continues while NI & UK post contractions in service sector output

Services Output (excluding Retail)3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

New orders growth slowing in the UK and continues to contract at a rapid rate in NI

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

…with employment levels still falling in NI & UK

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

The PMI signals modest employment declines for the service sector in Q4. But PMI includes private sector only

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

Local retailers still reporting falling orders & activity

Northern Ireland Retail PMI3 monthly average

25

30

35

40

45

50

55

60

65

70


Business Activity New Orders Backlogs No Change


ExpansionC

ontraction

Profits squeeze on local retailers intensifies

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 in the midst of a severe downturn

NI Construction PMI3 month moving average

20

30

40

50

60

Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12

Output New Orders Employment

Source: Markit Economics, Ulster Bank PMI

ExpansionC

ontraction

50 = No change

…….with profits squeeze continuing

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, RoI & NI all recording contractions in output

Construction Sector Output - PMI3 month moving average

20

30

40

50

60


PMI Index

NI UK RoI


ExpansionC

ontraction

… and with new orders falling in NI, UK & RoI

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 will wane as activity eases but pick-up in civil engineering sector

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70


Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

Lack of opportunities in the RoI with all construction sub-sectors declining in December

Republic of Ireland Construction Activity - PMI3 month moving average

20

30

40

50

60

70

Apr-07 Sep-08 Feb-10 Jul-11 Dec-12

Housing Activity Commercial Activity Engineering Activity

Source: Markit Economics & Ulster Bank

ExpansionC

ontraction

50 = No change

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northern ireland pmi slide pack, december 2012

Economy & Finance