Ulster Bank Northern Ireland PMI Slide Pack August 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

August 2016 Survey Update

Issued 12th September 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 remains stuck in a low gear for both manufacturing and services sectors

The UK’s composite PMI saw a ‘V-shaped recovery’ in August while other economies saw their PMIs deteriorate

Developed & Emerging Markets’ PMIs still stuck in low growth mode

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

Chinese services PMI picks-up in August while manufacturing activity stagnates

Australia’s services & manufacturing PMIs both plunge ‘Down Under’

France records a marked pick-up in growth, with Spain & Ireland also improving. Slowdown in Germany & Italy

EZ manufacturing & services output growth eases. Growth accelerates in retail while construction is still contracting

GDP picked up in Q1-16 but composite PMI signals that the Eurozone economy remains stuck in a low gear

The RoI continues to post the fastest rate of output growth in services with Brazil contracting at a rapid rate

US ISM manufacturing PMI joins Japan in contraction territory. EZ growth eases with no growth in Chinese PMI

Developed Markets still outperform Emerging Markets. The latter has struggled to get > 50 since March 2015

New Zealand & the UK record the fastest rates of manufacturing growth.

UK & to a lesser degree NI firms report a marked turnaround in output growth in August

PMI suggests private sector growth stalls in Q3*

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

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

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

Forward looking indicators suggest no meaningful rebound amongst NI and UK firms

RoI firms still reporting rising backlogs while their UK & NI counterparts post declines

NI export orders rise for the 2nd successive month 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 58-month high in August with output price inflation less marked

Regional Comparisons

The North West tops the regional growth table in August with Scotland still contracting

Scotland, London and the North East post contractions over the last 3 months to August

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

NI reports a faster rate of job creation than the national average with 3 regions posting job losses in August

NI posts the 2nd 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 overdone with manufacturing & services output returning to growth

The UK’s growth rate remained strong in Q2 at 0.6% q/q but PMI suggests growth will be marginal in Q3

Services was the only sector in the RoI to report a pick-up in growth with manufacturing output flat

NI retailers & manufacturing firms in growth mode in Q3* while services and construction in decline

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

Divergence: the rate of jobs growth accelerates for construction & manufacturing but stagnation in services

NI’s manufacturing firms report a marked pick-up in activity across all measures

NI & UK manufacturing output growth rebounds strongly while slowdown evident amongst RoI firms

NI manufacturing output growth back in line with pre-downturn long-term average

NI & RoI firms report moderate rates of orders growth with UK businesses reporting a pick-up in demand

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

Input cost inflation rockets to a 64-month high in August with firms raising prices at a record rate

NI’s manufacturing firms reporting a ‘V-shaped recovery’ in employment growth with the UK still shedding jobs

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

NI & UK services sectors signal output has been flat on average over the last 3 months

The rate of growth in NI’s services sector is moving further away from its pre-downturn long-term average

Incoming orders dry up for NI & UK firms over the last 3 months while RoI firms post strong rates of growth

Input cost inflation accelerates to a 31-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 growth rate still strong

NI retailers are still recruiting staff at a significant rate but sales and orders growth remains very weak

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

NI’s construction firms experiencing a lack of demand but are still increasing their staffing levels

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

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

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

UK firms report falling activity across all sectors over the last 3 months

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

Optimism amongst UK construction firms rises following its recent slump but 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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