Ulster Bank NI Slide Pack August 2017

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 2017 Survey Update

Issued 12th September 2017

Richard RamseyChief Economist Northern Ireland

www.ulstereconomix.comrichard.ramsey@ulsterbankcm.com

Twitter @UB_Economics

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 to a 28-mth high (53.9)• Growth accelerates in China, US, Germany, Russia & RoI• Chinese composite hits a 6-mth high of 52.4• Emerging Markets’ PMI rebounds from 10-mth low to 52.1• Eurozone composite PMI remains at 6-mth low (55.7) • Germany up from 10-mth low (55.8), France (55.2) & Spain

(55.3) ease to 7-mth lows while Italian PMI eases to 55.8 • UK composite PMI slips to 6-mth low (53.8) with services

53.2 (11-mth low) & manufacturing at 7-mth high (58.4). Construction eased to 12-mth low of 51.9.

• RoI business activity rebounds to a 3-mth high (58.1)• NI firms’ output (55.0) & orders (54.9) growth accelerates to

8-mth highs. Input cost inflation accelerates• NI services output at 17-mth highs & jobs hits a 41-mth high

August 2017 PMIs – Key highlights

Global output growth accelerates to its fastest rate since Apr-15 with services & manufacturing picking up

The US & China show an improvement in August with the UK PMI easing marginally

Divergence between Developed Markets PMI growth rate and Emerging Markets

Emerging Markets’ growth rate rebounds from a 10-mth low with growth rates in China & Russia accelerating

Chinese composite & manufacturing PMIs hit 6-mth highs

Germany & the RoI were the only two economies to report faster rates of growth in August

The Eurozone’s manufacturing & construction output growth accelerated in August.

PMI suggests another strong quarter of EZ economic growth in Q3

Ireland, N.Ireland & Spain top the service sector growth league with India & Brazil in contraction mode

Manufacturing growth accelerates across all major economies most notably the US (76-mth high)

Developed Markets outperforming Emerging Markets

NI & RoI firms report faster rates of growth in August

PMI suggests private sector growth peaked in 2016 Q4 and eased in H1. But Q3 looks more promising

2014 was the 1st year in 7 years that the 4 main indicators recorded expansion, repeated in 2015, 2016 & 2017 ytd

Output & new orders growth rates accelerate in Q3* relative to Q2

NI firms report an acceleration in the pace of expansion in activity, new orders & employment

NI new orders growth accelerates NI firms. While UK & RoI firms signal a slowdown in orders growth

Backlogs of work mounting amongst NI firms

NI export orders growth accelerates in August

NI’s rate of employment growth quickens from six-month low. Both NI & UK firms still lag the RoI

NI’s rate of employment growth has eased in recent quarters but PMI suggests faster growth in Q2/Q3*

Input & output cost inflation continues to ease back from their recent multi-year highs

Regional Comparisons

West Midlands tops the regional growth table with London, Scotland & the North East (contracting) at the bottom

The North East, Scotland & London post the slowest rates of growth in the 3 months to August

The West Midlands reported the fastest growth rate over the last 12 months with Scotland the slowest

NI’s pace of job creation accelerates in August but remains below the UK average and 7 other regions

NI’s employment growth rate underperforming against the UK average & most regions over the last 3 months

Scotland & the North East have reported the weakest rates of jobs growth over the last year

SectoralComparisons

Services & construction report a slowdown in output growth while manufacturing’s growth rate accelerates

PMI suggests that don’t expect a meaningful rebound in UK GDP growth in Q3

RoI firms signal a slowdown in construction but manufacturing & services output accelerates

NI services industry & retail are the only sectors to experience a pick-up in output growth in Q3*

Service sector records the fastest rates of growth followed by retail. Construction contracting.

Construction & manufacturing firms report a slowdown in jobs growth with hiring in services accelerating

Inflationary pressures easing across all sectors bar construction

NI’s manufacturing firms report slower rates of growth in output & employment but orders hold up

NI manufacturers post an easing in output growth with RoI & UK firms maintaining robust rates of expansion

NI manufacturing output growth (last 3 months) dips below its pre-downturn long-term average

UK & RoI firms continue to report robust rates of new orders growth. NI growth rate holds steady

Manufacturing output growth accelerates for all countries bar Spain

£ weakness exacerbated input cost inflation. NI/UK input cost inflation rebounds from July’s 13-mth low

Input & output cost inflation hits a record high in Q1. But significant easing in inflationary pressures in Q2/Q3

NI manufacturing firms report a slowdown in pace of job creation while UK & RoI post stronger growth rates

NI’s services sector expansion accelerates

NI services sector output growth rate accelerates further above the UK rate. But both still lag the RoI.

The growth rate in NI’s services sector approaching its pre-downturn long-term average

New orders growth rate eases for RoI & UK but NI firms signal a pick-up in rate of expansion

Input cost inflation continues to ease from its recent 6-year high with output price inflation more subdued

NI firms hiring at an accelerating rate and at a faster rate than the UK. But both lagging behind the RoI

Retail sales rebound strongly in August with orders also rising. Pace of retail jobs growth unchanged

NI retailers report an easing in inflation rates relative to their recent highs

NI’s construction firms report falling output & orders with employment flat

Input cost inflation remains high with firms increasing prices at a much weaker rate

NI firms report no growth in output with their RoI & UK counterparts posting faster rates of growth

NI firms report falling orders whilst growth in UK order books is flat

UK firms report a drop in commercial activity with commercial work flat. Housebuilding remains strong

Construction sector still reporting a shortage of sub-contractors with rates charged rising

Optimism amongst UK construction firms remains below its long-run average

RoI housing & commercial construction activity strong but slowing while engineering output contracting

RoI’s construction firms still reporting a decline in the availability of sub-contractors & rising rates of pay

RoI construction firms still remain very optimistic about the year ahead & well above the long-term average

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