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Sustaining Competitiveness:West Midlands Industrial Productivity
Rob Dobson / The Belfry / 6 July 2012
The Science of Finance
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WMEF – Sustaining Competitiveness
Agenda
– Introduction to the West Midlands PMI
– Sustaining competitiveness: Why is labour productivity important?
– Productivity PMI – Performance at the EU level
– West Midlands PMI: Output and Employment
– West Midlands Industrial Productivity: The Productivity PMI
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WMEF – Sustaining Competitiveness
Introduction to Markit PMIs
– Business surveys of over 20,000 companies worldwide
– Timely, accurate, high-frequency monthly economic indicators
– Released in advance of comparable official economic data
– Cover the largest world economies and key emerging markets
– Cover wide range of variables (including output and employment)
– Internationally consistent methodology
– Aggregate to global level or breakdown to national region
– Used by all major central banks and financial institutions
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PMI: World Map
Markit Markit (under development) Independent (included in Global PMI)
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WMEF – Sustaining Competitiveness
West Midlands PMI
30.0
40.0
50.0
60.0
2008 2009 2010 2011 2012
West Midlands
United Kingdom
Global
Sources: Markit, Lloyds, CIPS, JPMorgan
PMI, Business Activity\Output
45.0 50.0 55.0 60.0
N. Ireland
North East
North West
South West
East Midlands
South East
Yorks & Humb
East
Wales
Scotland
London
West Midlands
PMI Business Activity, May 2012
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WMEF – Sustaining Competitiveness
Sustaining Competitiveness – global and national
1) Exchange rate Pricing mechanism between currency areas
– affects both imported input costs and overseas selling prices
– directly impacts on international competitiveness
– high frequency data available from spot and future exchange rates
2) Cost efficiency
– Capital and commodity prices available in “real time”
– But no real high frequency benchmark of efficient labour utilisation
– Labour cost efficiency – the missing piece in the puzzle
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WMEF – Sustaining Competitiveness
Why is labour productivity important?
Micro – company level
– Cost control
– Competition: productivity
advantage offsets higher
labour cost when
competing against lower
labour cost producers or
nations
Macro – economy level
– Government policy
– Inflation
– Interest rates
– Investment
– Wealth creation
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WMEF – Sustaining Competitiveness
Raising the question...
...how can we obtain an accurate, timely and
internationally comparable measure of
West Midlands industrial productivity?
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WMEF – Sustaining Competitiveness
Productivity formula
Productivity =
Economic Output
Employment
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WMEF – Sustaining Competitiveness
Productivity PMI: Performance
Evidence from the Eurozone Productivity PMI
35.0
40.0
45.0
50.0
55.0
60.0
65.0
2008 2009 2010 2011 2012
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Eurozone ManufacturingProductivity PMI (LHS)
Eurostat ManufacturingProductivity (RHS)
Productivity, % rate of change, quarter-on-quarter
Productivity PMI,50 = no change over month
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WMEF – Sustaining Competitiveness
West Midlands PMI: Output
Output: WMids vs UK, Global... ...and relative to other UK regions
30.0
40.0
50.0
60.0
2008 2009 2010 2011 2012
West Midlands
United Kingdom
Global
Sources: Markit, Lloyds, CIPS, JPMorgan
PMI, Business Activity\Output
1
2
3
4
5
6
7
8
9
10
11
12
2008 2009 2010 2011 2012
National Rank, PMI Business Activity Index, West Midlands
Bars: National Rank, West Midlands Red period = UK GDP recessionLine: West Midlands UK Rank Trend
Sources: Markit, Lloyds
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WMEF – Sustaining Competitiveness
West Midlands PMI: Employment
Output: WMids vs UK, Global... ...and relative to other UK regions
1
2
3
4
5
6
7
8
9
10
11
12
2008 2009 2010 2011 2012
National Rank, PMI Employment Index, West Midlands
Bars: National Rank, West Midlands Red period = UK GDP recessionLine: West Midlands UK Rank Trend
Sources: Markit, Lloyds
30.0
40.0
50.0
60.0
2008 2009 2010 2011 2012
West Midlands
United Kingdom
Global
Sources: Markit, Lloyds, CIPS, JPMorgan
PMI, Employment
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WMEF – Sustaining Competitiveness
West Midlands Industrial Productivity
West Midlands vs UK Compared to other UK regions
40.0
50.0
60.0
70.0
2009 2010 2011 2012
West Midlands
United Kingdom
Source: Markit
Productivity PMI
44.0 47.0 50.0 53.0 56.0
North
Rest of UK
Midlands
UnitedKingdom
Scotland
WestMidlands
South
May
April
Productivity PMI, April\May 2012
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WMEF – Sustaining Competitiveness
West Midlands Industrial Productivity
Developed Competitors Emerging Market Competitors
40.0
50.0
60.0
70.0
2009 2010 2011 2012
West Midlands
Eurozone
United States
Source: Markit
Productivity PMI
40.0
50.0
60.0
70.0
2009 2010 2011 2012
West MidlandsBrazilRussiaIndiaChina
Source: Markit
Productivity PMI
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