slide pack for the ulster bank northern ireland pmi, october 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

October 2014 Survey Update

Issued 10th

November 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 output growth eases to a 6-month low in October due largely to slowdown in the services sector

Global Output - PMI

25

30

35

40

45

50

55

60

65

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

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

EZ services sector growth remains sluggish, modest pick- up in manufacturing with retail & construction contracting

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 EZ’s composite PMI has suggested economic growth in Q2 & Q3 whereas GDP was flat in Q2

EZ GDP versus EZ Composite PMIComposite excludes construction

2025303540455055606570

2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*

PMI Index

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

GDP % Q/Q

GDP Q/Q PMI

Source: Bloomberg & Markit Economics, * October only

EZ Q2-14 GDP 0%

NI & RoI manufacturing firms are outperforming most of their international competitors in terms of output growth

PMIs: Manufacturing Output October 2014

35 40 45 50 55 60 65 70 75

AustriaFrance

IndonesiaS.Korea

BrazilGreece

ItalyS.Africa

ChinaVietnamAustralia

EZPoland

EURussiaJapan

GermanyTaiwanTurkey

SingaporeGlobal

IndiaMexico

UKNetherlands

SpainCanada

Czech RepublicNI

USIreland

N.Zealand*Switzerland

Denmark

Source: Markit Economics Output Indices, *September

UK, NI & RoI

€

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

PMIs: Services Output October 2014

35 40 45 50 55 60 65

AustraliaRussia

BrazilFranceJapanIndiaItaly

Emerging MarketsEZ

ChinaEU

GlobalNI

Developed MarketsGermany

SpainUK

US*Ireland

Source: Markit Economics Output Indices

€

Spain & Ireland post an acceleration in growth in October, Italy returns to growth but France still in contraction mode

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

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

The US, UK & Chinese Composite PMIs all record an easing in their growth rates & Japan contracts in October


30

35

40

45

50

55

60

65

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

Eurozone US (Markit) China Japan No Change UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

The US continues to enjoy a robust manufacturing recovery remains whilst the EZ approaches stagnation

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

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

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Emerging markets growth slips to a 5-month low with Brazil & Russia in contraction mode


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 October

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

Firms in the UK & NI signal their slowest rates of growth in business activity since June 2013

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14

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

2004 Q2 2005 Q4 2007 Q2 2008 Q4 2010 Q2 2011 Q4 2013 Q2 2014 Q4*

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, * refers to October for PMI

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

ContractionE i

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, * refers to 4 months to October

The pace of growth in output, new orders & employment continues to slow

NI Private Sector ActivityMonthly

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment

Source: Markit Economics & Ulster Bank NI PMI

ExpansionC

ontraction

RoI order books are growing at their fastest rate in >14 yrs but the pace of growth eases in NI & UK

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65


NI UK RoI

Source: Markit Economics & Ulster Bank NI

Orders increasing

Orders C

ontracting

Following a surge in backlogs of work, notably within NI, outstanding work eases to a 13-mth low in October

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

NI firms post their 16th successive monthly rise in export orders in October 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/Q4

NI Employment: PMI v QES**

35

40

45

50

55

60

2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*

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 October only

Job creation accelerates in the RoI in October but the pace of jobs growth slows to an 11-mth low for NI

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Inflationary pressures easing with output prices falling

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80

Oct-04 Oct-06 Oct-08 Oct-10 Oct-12 Oct-14

Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services

Regional Comparisons

NI is slipping down the regional league table as far as business output growth is concerned

Output / Business ActivityOctober 201450 = No change

54.756.4

60.4

40

45

50

55

60

65

70

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

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

Output / Business Activity 3 months to October 2014

50 = No change

56.3

60.858.1

40

45

50

55

60

65

70

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

PMI Index


Expansion

Contraction

… and over the last 12 monthsOutput / Business Activity

12 months to October 201450 = No change

58.8 59.158.5

44

47

50

53

56

59

62

65

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

NI posts further job gains in October but lags behind the UK & the RoI. The North East posts job losses

Employment LevelsOctober 2014

50 = No change

55.9

58.3

52.2

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


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

Employment Levels3 months to October 2014

50 = No change

53.1

55.8

56.9

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


The RoI, London, the East & North West of England posted the sharpest rates of job creation over the last year

Employment Levels12 Months to October 2014

50 = No change

55.8

54.2

56.9

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

UK services & construction disappointing expectations with manufacturing posting an acceleration in growth

UK Business Activity / Output - PMIs

20

30

40

50

60

70

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

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of economic growth between Q1-13 & Q3-14 with further strong growth expected in Q4-14

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014Q4*

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, * Q4 refers to October only

RoI output growth accelerates within manufacturing & construction but eases within the services 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 manufacturing sector is the only sector posting a stronger rate of growth in output in H2*-14 than 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

Source: Markit Economics & Ulster Bank NI PMI, * refers to 4 months to October

Output growth within NI’s services & construction continues to slow but still remains at robust rates

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


Expansion

Contraction

…with construction & services 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


Job Gains

Job Losses

NI’s manufacturing firms continue to report robust rates of growth in output, orders & job creation

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

NI & RoI firms have maintained strong rates of growth in manufacturing output while the growth rate eases in the UK

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Strong rates of manufacturing orders growth amongst NI & RoI firms but marked slowdown for UK firms

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 France


C

ontractionExpansion

Input cost inflation rising at its weakest rate in 28 months with NI manufacturing firms reporting a fall in prices

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 a moderation in manufacturing employment growth in Q3/Q4 following record high in Q2

NI Manufacturing Employment: PMI v QES**

30

35

40

45

50

55

60

65

2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*

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

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70

Oct-03 Aug-05 Jun-07 Apr-09 Feb-11 Dec-12 Oct-14

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

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

Services Output (excluding Retail)3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

…but NI firms report a marked slowdown in the rate of new orders growth in Q3 & Q4 (October)

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI’s service sector is experiencing an easing in inflationary pressures

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 eases in NI & UK in Q3 & Q4 (October) but remains very strong in the RoI

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/Q4

NI Services Employment: PMI v QES**

40

45

50

55

60

65

2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*

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, 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 output price deflation with prices falling at their fastest rate since June 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

Following Q2’s record rates of growth, NI’s construction firms report an easing in their rates of growth in Q3/Q4

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

…but input cost inflation remains very high

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

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

2004 Q4 2007 Q2 2009 Q4 2012 Q2 2014 Q4*

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, NI & RoI firms although pace of growth has eased for NI firms

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

Growth in NI orders eases from record high but remains strong in Q3/Q4 suggesting more 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 recently increased at its fastest rate since June 1997

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Oct-05 Apr-07 Oct-08 Apr-10 Oct-11 Apr-13 Oct-14

Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

…with an increasing number of 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

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