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Slides illustrating data from the Ulster Bank Northern Ireland PMI for August 2013, including analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector
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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 2013 Survey Update
Issued 9th
September 2013
Richard Ramsey
Chief Economist Northern Ireland
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 in August…
Global Output - PMI
25
30
35
40
45
50
55
60
65
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Total Manufacturing Services
Source: Markit Economics
ExpansionC
ontraction
… with both manufacturing & services sectors posting growth in the Eurozone
Eurozone PMIs: Output
25
30
35
40
45
50
55
60
65
Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
Composite (M&S) Manufacturing Services Construction
Source: Markit Economics Output Indices Expansion
Contraction
Top performers within manufacturing incl. US, Denmark, UK & NI. Underperformers incl. BRICs /Asia, Greece & Australia
PMIs: Manufacturing Output August 2013
35 40 45 50 55 60 65 70
S.KoreaAustralia
IndiaIndonesia
FranceGreece
VietnamTaiwan
BrazilSingapore
RussiaChina
MexicoTurkey
CanadaSpainIsrael*IrelandGlobal
SwitzerlandEZ
JapanAustria
ItalyEU
GermanyNetherlands
CzechPoland
NIS.Africa
N.Zealand*UKUS
Denmark
Source: Markit Economics Output Indices, *July, for the US ISM is used.
UK, NI & RoI
€
The US, UK & Ireland post the fastest rate of service sector output growth in August
€
PMIs: Services Output August 2013
35 40 45 50 55 60 65
AustraliaIndiaItaly
FranceBrazilSpain
EZEmerging Markets
JapanRussia
GermanyChina
EUGlobal
NIUK
IrelandUS*
Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services
€
Three of the four largest economies within the eurozone are now expanding
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
30
35
40
45
50
55
60
65
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Source: Markit Economics PMIs
Contraction
Expansion
Acceleration in growth for the US, UK, China & the Eurozone
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
35
40
45
50
55
60
65
Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Eurozone US (ISM) China UK
Source: Markit Economics PMIs, US includes construction
ExpansionC
ontraction
All major economies posting an improvement in August
Manufacturing PMIs
25
30
35
40
45
50
55
60
65
Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
US (ISM) China Japan Eurozone
Source: Markit Economics
Contraction
Expansion
But outside of China, Russia is the only one of the BRIC economies in expansion mode (> 50.0)
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
30
35
40
45
50
55
60
65
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Brazil Russia India Emerging Markets No Change
Source: Markit Economics
Contraction
Expansion
… with a strong Aussie $ and a slowdown in Asia is pushing Australia ‘Down Under’ too
Australia - PMI
30
35
40
45
50
55
60
65
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Manufacturing Services No Change
Source: Markit Economics PMIs
Contraction
Expansion
NI, UK & the RoI all post strong rates of growth in August. NI firms record their fastest rate of growth since March 2007
Private Sector Business Activity - PMIs
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
NI UK RoI
Source: Markit & Ulster Bank NI PMI50 = threshold between expansion / contraction
Expansion
Contraction
**PMI Surveys Exclude Agriculture & Public Sector**
PMI suggests growth in DFP’s new private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q2/Q3 2013
NI Private Sector Output Index Versus NI PMI
-6-5-4
-3-2-1012
345
2003 Q1 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3*
PSO Q/Q%
30
35
40
45
50
55
60
65
PMI NICEI Left Hand Scale PMI Right Hand Scale
Source: New DFP Northern Ireland Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI , * average for June & July
50 mark is the threshold for expansion / contraction with PMI
Expansion
ContractionE i
NI firms report an increase in business activity, new orders & employment over the last 3 months
NI Private Sector Activity3 month moving average
30
35
40
45
50
55
60
65
70
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Business Activity New Business Employment
Source: Markit Economics & Ulster Bank NI
ExpansionC
ontraction
Forward looking indicators suggest more growth in all three economies in the months ahead
Private Sector New Orders3 month moving average
30
35
40
45
50
55
60
65
Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13
NI UK RoI
Source: Markit Economics & Ulster Bank NI PMI
Orders increasing
Orders C
ontracting
Surge in demand is leading to backlogs of work in NI & the UK
Private Sector Backlogs3 month moving average
30
35
40
45
50
55
60
Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13
NI UK RoI
Source: Markit Economics & Ulster Bank NI PMI
Increasing D
ecreasing
NI firms post the first increase in export orders since October 2007
NI New Export BusinessMonthly
20
25
30
35
40
45
50
55
60
65
Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13
New Export Orders No Change
Source: Markit Economics & Ulster Bank NI
Grow
th AcceleratingC
ontraction Accelerating
PMI underestimated job gains in 2012 (relative to official jobs survey). PMI signals a return to employment growth in Q3 2013
NI Employment: PMI v QES*
35
40
45
50
55
60
Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13*
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 except * average of July & August
Firms within the UK, RoI & NI all post strong employment gains in August
Private Sector Employment LevelsMonthly
30
35
40
45
50
55
60
Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
NI UK RoI
Source: Markit Economics & Ulster Bank NI PMI
Job Gains
Job Losses
Private sector’s profitability squeeze eases
NI Private Sector Profit Squeeze3 Month Moving Average
30
40
50
60
70
80
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Output Prices Input Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI
Profits squeeze
Price of goods & services falling
Regional Comparisons
PMIs experience a heatwave in August with strong growth reported everywhere…
Output / Business ActivityAugust 201350 = No change
60.7
58.457.2
40
45
50
55
60
65
70
NW SE Lon SW UK EM East WM NI Scot Wal Y&H NE RoI
PMI index
ExpansionC
ontractionSource: Markit Economics & Ulster Bank NI PMI
… all the UK regions post growth over the last 3 months
Output / Business Activity 3 months to August 2013
50 = No change
54.8 55.0
58.8
40
45
50
55
60
65
NW Lon SE UK SW WM East Y&H Scot Wal EM NE NI RoI
PMI Index
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
…but NI is the only UK region to post a decline in output over the last 12 months
Output / Business Activity 12 months to August 2013
50 = No change
53.1 52.9
48.3
40
45
50
55
60
Wal Lon Y&H NW SE Scot UK East EM WM SW NE NI RoI
PMI index
ExpansionC
ontraction
Source: Markit Economics & Ulster Bank NI PMI
All the UK regions and the Republic of Ireland post employment growth in August …
Employment LevelsAugust 201350 = No change
51.850.9
53.6
44
46
48
50
52
54
56
58
WM NW Scot SW East NI NE UK Lon Y&H EM SE Wal RoI
PMI Index
IncreasingD
ecreasing
Source: Markit Economics & Ulster Bank NI PMI
… and over the last 3 months to August
Employment LevelsLast 3 months to August 2013
50 = No change
52.3
50.3
54.1
44
46
48
50
52
54
56
58
WM NW SW East Lon Scot UK Wal SE NE Y&H EM NI RoI
PMI Index
IncreasingD
ecreasing
Source: Markit Economics & Ulster Bank NI PMI
NI posts the steepest decline in employment & RoI the sharpest rise over the last 12 months
Employment Levels12 months to August 2013
50 = No change
50.7
52.3
48.5
42
44
46
48
50
52
54
WM EM SE East Scot Wal UK SW Lon NW Y&H NE NI RoI
PMI Index
IncreasingD
ecreasing
Source: Markit Economics & Ulster Bank NI PMI
Sectoral Comparisons
All three broad UK sectors witness a marked acceleration in output growth in August
UK Business Activity / Output - PMIs
20
30
40
50
60
70
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Services Manufacturing Construction
Source: Markit Economics
ExpansionC
ontraction
UK economic growth accelerates in Q2 & Q3
UK GDP versus UK Composite PMIUK Composite includes Construction
25
30
35
40
45
50
55
60
65
2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3*
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, * refers to July & August
RoI’s services sectors an acceleration in output growth while construction remains sub-50 – but only just
RoI Business Activity - PMIs3 month moving average
20
25
30
35
40
45
50
55
60
65
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
Manufacturing Services Construction No Change
Source: Markit Economics
ExpansionC
ontraction
All three broad sectors reported increased levels of business activity in the 3 months to August 2013…
NI Private Sector Output 3 month moving average
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Manufacturing Services Construction
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
…with all sectors reporting job gains over the last 3 months
NI PMI - Employment Index 3 month moving average
25
30
35
40
45
50
55
60
65
Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
Manufacturing Services Construction
Source: Markit Economics & Ulster Bank NI PMI
Job Gains
Job Losses
NI’s manufacturing sector posts an acceleration in business growth & new orders over the last 3 months
NI Manufacturing Activity3 month moving average
25
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Business activity New Orders Employment
Source: Markit Economics & Ulster Bank NI PMI
Grow
th acceleratingC
ontraction accelerating
The UK, RoI and NI all witness an acceleration in manufacturing output during the last 3 months
Manufacturing Output3 month moving average
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
The UK posts the strongest growth in new orders
Manufacturing New Orders3 month moving average
25
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
N.Ireland is outperforming its European competitors
Manufacturing Output - PMI
20
30
40
50
60
70
Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13
RoI Italy Spain Greece NI
Source: Markit Economics PMIs
Contraction
Expansion
Cost price inflation remains for local manufacturing firms but pricing power is returning
NI Manufacturing Input & Output Inflation3 month moving average
30
40
50
60
70
80
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
No Change Input Costs Output Prices
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
PMI signals job gains in Q1 2013 followed by a fall in in Q2 2013 and another rise in Q3
NI Manufacturing Employment: PMI v QES*
30
35
40
45
50
55
60
65
Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13*
PMI Index
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
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 firms
Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages except * average of July & August
Recent growth in NI service sector output / orders is feeding through into higher levels of employment…
NI Service Sector (excludes Retail)3 month moving average
30
35
40
45
50
55
60
65
70
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Business activity New Orders Employment
Source: Markit Economics & Ulster Bank NI
Grow
th acceleratingC
ontraction accelerating
In July, all three economies post output growth for the first time since 2007. Growth accelerates in August…
Services Output 3 month moving average
30
35
40
45
50
55
60
65
70
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI
Contraction
Expansion
… and strong new orders growth in the same three economies
Services New Orders (excluding Retail ) 3 month moving average
30
40
50
60
70
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
NI’s services sector sees inflationary pressures ease
NI Services Input & Output Inflation3 month moving average
30
40
50
60
70
80
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
No Change Input Costs Output Prices
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
…with employment levels picking up in July & August in N.Ireland
Services Employment3 month moving average
30
35
40
45
50
55
60
65
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
UK RoI NI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
The services PMI finally shows employment growth after 5 years of decline
NI Services Employment: PMI v QES*
40
45
50
55
60
65
Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13*
PMI Index
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
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 and includes the public sector
Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages except * average of July & August
Retailers experience a retail boom in July & August
Northern Ireland Retail PMI3 monthly average
25
35
45
55
65
75
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Business Activity New Orders Backlogs No Change
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
Profits squeeze on local retailers eases significantly due to increased pricing power
NI Retail Input & Output Inflation3 month moving average
30
40
50
60
70
80
90
Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13
Input Costs Output Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI
Profits squeeze
NI construction sector still reports growth in output and orders. But employment dips in August
NI Construction PMI3 month moving average
20
30
40
50
60
Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13
Output New Orders Employment
Source: Markit Economics, Ulster Bank PMI
ExpansionC
ontraction
50 = No change
…but the profits squeeze continues
NI Construction Sector Profits Squeeze3 month moving average
20
30
40
50
60
70
Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13
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
Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13*
PMI Index
-10.0%
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
Q/Q
PMI Employment Index No Change QES Q/Q
Discontinuity in QES Series
Job losses
Job gains
*QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms
Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages except * average of July & August
UK (59.1) & NI (51.9) construction sectors post healthy rates of growth in August. With RoI almost flat (49.7)
Construction Sector Output - PMI3 month moving average
20
30
40
50
60
Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13
PMI Index
NI UK RoI
Source: Markit Economics
ExpansionC
ontraction
New orders in the UK & NI have been rising over the last 3 months but NI posts a dip in August (47.5)
Construction Sector New Orders - PMI3 month moving average
20
30
40
50
60
Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13
PMI Index
NI UK RoI
Source: Markit Economics
ExpansionC
ontraction
Growth opportunities for NI firms within GB market particularly within the house building sector…
UK Construction Activity - PMIs3 month moving average
20
30
40
50
60
70
Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13
Housing Activity Commercial Activity Civil Engineering Activity
Source: Markit Economics
ExpansionC
ontraction
…but fewer opportunities in the RoI, with civil engineering remaining particularly weak
Republic of Ireland Construction Activity - PMI3 month moving average
20
30
40
50
60
70
Feb-07 Mar-08 Apr-09 May-10 Jun-11 Jul-12 Aug-13
Housing Activity Commercial Activity Engineering Activity
Source: Markit Economics & Ulster Bank
ExpansionC
ontraction
50 = No change
Slide 55
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is indicative,
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