Ulster Bank Slide Pack October 2016

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 2016 Survey Update

Issued 15th November 2016

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 hits an 11-month high

US Markit composite PMI posts its best reading of the year with improvements in other economies too

Developed & Emerging Markets’ PMIs improving with the latter at a 20-month high

Emerging Markets’ PMI remains in growth mode with India reporting a marked improvement in October

Chinese services & manufacturing PMIs both pick-up in October with manufacturing at a 2½-year high

Australia’s services & manufacturing PMIs both return to growth

Italy, France & Ireland signal a slowdown in their growth rates with UK, Germany & Spain posting a pick-up

EZ manufacturing & services output growth quickens. But retail & construction are both in contraction mode

GDP remained stuck in a low gear in Q2 & Q3 but PMI signals more momentum in Q4*

US overtakes Ireland to post the fastest rate of output growth in services with Brazil in a league of its own

All major economies report an improvement in manufacturing conditions

Developed Markets still outperform Emerging Markets

NI firms report a modest pick-up in output growth with the RoI economy slowing fast & overtaken by the UK

PMI suggests private sector growth stalls in Q3 but recovers in Q4*

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

Output & orders fall in Q3* with pace of job creation easing. £ weakness boosts growth in exports in Q3 / Q4*

NI firms report a return to growth in output but new orders growth stagnant & jobs growth slowing

UK firms report a marked pick-up in new orders growth while RoI growth slows and NI order books remain flat

RoI firms report rising backlogs while UK & NI firms post stagnation and declines respectively

NI export orders rise at a near record rate with £ weakness cited as a factor behind growth in RoI demand

RoI jobs growth accelerates while NI and UK report lower rates of employment creation

Input cost inflation accelerates to a 65-month high in October with output price inflation less marked

Regional Comparisons

The North West tops the regional growth table in October with Scotland at the foot of the regional league table

Scotland, NI & the North East post the weakest growth rates of all the UK regions over the last 3 months

The RoI reported the fastest growth rate in business activity over the last year with Scotland stagnating

NI reports the 3rd slowest rate of job creation in the UK with London reporting no change in staffing levels

NI posts the 3rd fastest rate of employment growth of all UK regions over the last 3 months

Scotland & the North East (job losses) were the only 2 regions not to post growth over the last 12 months

SectoralComparisons

Post-Brexit vote pessimism appears to have been and gone but will it return?

The UK’s growth rate remained relatively strong in Q3 at 0.5% q/q which was firmer than PMI suggested

Services was the only sector in the RoI to report a slowdown in growth

NI retailers & manufacturing firms in growth mode in Q4* while services weak & construction in rapid decline

Services sector’s output growth stagnates with construction contracting & manufacturing recovering

Divergence: the rate of job losses accelerates for construction with manufacturing & services expanding

NI’s manufacturing firms report a marked pick-up in activity but new orders and employment flat

UK manufacturing output growth accelerates markedly with both UK & NI outperforming the RoI

NI manufacturing output growth just below pre-downturn long-term average

UK businesses reporting a marked pick-up in demand but NI manufacturing orders’ growth is flat

NI manufacturing firms bucking the wider trend of slower growth within the Eurozone

Input cost inflation rockets to a 99-month high in October with firms raising prices at a weaker rate

NI’s manufacturing firms reporting a ‘V-shaped recovery’ in employment growth & outperforming the UK & RoI

All key indicators across NI’s services sector point to low growth / stagnation

UK services sector output rebounds in the UK but slows markedly in the RoI. NI output remains broadly flat

The rate of growth in NI’s services sector is broadly flat and well below its pre-downturn long-term average

New orders dry up for NI but UK firms report a marked pick-up. RoI firms reporting a slowdown in growth

Input cost inflation accelerates to a 33-month high with output prices increasing at a much weaker rate

NI & UK firms report muted rates of service sector jobs growth with RoI’s rate still strong albeit slowing

NI retailers are still recruiting staff at a significant rate with sales and orders growth accelerating

NI retailers report a marked acceleration in input cost inflation while output price rises pick-up too

NI’s construction firms posting a contraction in all key indicators

Input cost inflation accelerating at a rapid rate with firms increasing prices at a much weaker rate

NI firms report a sharp decline in output over the last 3 months in contrast to growth amongst UK & RoI firms

NI firms continue to post a slump in new orders growth in contrast to robust growth amongst RoI firms

UK firms report an improvement in conditions across housing and civil engineering activity

Slowdown in construction sector briefly led to an increase in supply of sub-contractors

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

RoI housing and commercial construction activity has been improving while engineering output stagnates

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

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

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