Slide pack for the Ulster Bank Northern Ireland PMI, May 2015

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

Includes analysis of Global, Eurozone, UK, UK Regions, NI &

Republic of Ireland economic performance by sector

May 2015 Survey Update

Issued 8th

June 2015

Richard Ramsey Chief Economist Northern Ireland

www.ulstereconomix.com [email protected]

Twitter @UB_Economics

mailto:[email protected]

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 eases to a 4-month low due to a slowdown in services activity

Global Output - PMI

25

30

35

40

45

50

55

60

65

May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

EZ manufacturing & services sectors growth eases slightly with retail returning to growth for the 1st time in 14mths

Eurozone PMIs: Output

25

30

35

40

45

50

55

60

65


Composite (M&S) Manufacturing Services

Construction Retail No Change

Source: Markit Economics Expansion

Contraction

The Eurozone’s composite PMI signals economic growth rate rising in H1 2015

EZ GDP versus EZ Composite PMIComposite excludes construction

20

30

40

50

60

70

2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2*

PMI Index

-3-2.5-2-1.5-1-0.500.511.52

GDP % Q/Q

GDP Q/Q PMI

Source: Bloomberg & Markit Economic, * PMI refers to average for April & May

EZ Q1-15 GDP 0.4%

The RoI is ranked 1st in terms of manufacturing output growth performance again in May

PMIs: Manufacturing Output May 2015

35 40 45 50 55 60 65

BrazilIndonesia

S.KoreaGreeceFrance

DenmarkTaiwan

ChinaRussia

S.AfricaTurkey

SingaporeCanada

SwitzerlandJapanGlobal

GermanyN.Zealand*

AustriaUK

AustraliaEUEZNI

MexicoPoland

IndiaUS

Czech RepublicNetherlands

VietnamItaly

SpainIreland

Source: Markit Economics Output Indices, *March

UK, RoI & NI

€

The Republic of Ireland, Spain & the UK posted the fastest rates of service sector output growth in May

PMIs: Services Output May 2015

35 40 45 50 55 60 65

BrazilAustralia

IndiaJapan

Emerging MarketsItaly

RussiaFrance

GermanyChina

EZGlobal

EUDeveloped Markets

NIUS*UK

SpainIreland

Source: Markit Economics Output Indices

€

Ireland & France saw growth accelerate in May whereas other economies reported a slowdown

Composite PMIs (Manufacturing & Services ** Excludes Construction**)

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

US, EZ, UK & China PMIs posted a slowdown in growth in May. Japan saw a pick-up in its growth rate


30

35

40

45

50

55

60

65

May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15

Eurozone US (Markit) China Japan UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

All manufacturing PMIs improved in May relative to April

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Diverging Emerging Markets performance with Russia improving but Brazil’s recession deepens


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets


Contraction

Expansion

Australia’s services & manufacturing sectors on opposite sides of the 50 threshold in May

Australia - PMI

30

35

40

45

50

55

60

65

May-07 May-09 May-11 May-13 May-15

Manufacturing Services No Change


Contraction

Expansion

NI posts its fastest rate of output growth in 7 months but continues to lag behind the UK & RoI

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

May-03 May-05 May-07 May-09 May-11 May-13 May-15

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 private sector composite index throughout 2014 but recovery stalls in H1 2015

NI Private Sector Output Index Versus NI PMI

-6-5-4-3-2-1

012345

2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2*

NICEI Q/Q%

30

35

40

45

50

55

60

65PMI NICEI Left Hand Scale PMI Right Hand Scale

Source: DFP NI Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI,Q2 2014 is latest data for NICEI.*Q2 refers to average of April & May for the PMI only

50 mark is the threshold for expansion / contraction with PMI Expansion

Contraction

2014 was the first year in 7 years that business activity, new orders, employment & export orders all expanded

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

2007 2008 2009 2010 2011 2012 2013 2014

PMI Index

Business Activity New Orders Employment Export Orders ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI

NI recovery took hold in H2-13, all indicators improved in H1- 14 & eased in H2-14. Exports & business activity fell in H1-15

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

65

2006

H220

07H1

2007

H220

08H1

2008

H220

09H1

2009

H220

10H1

2010

H220

11H1

2011

H220

12H1

2012

H220

13H1

2013

H220

14H1

2014

H220

15H1*

PMI Index

Business Activity New Orders Employment Export Orders

ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI PMI, * refers to 5 months to May 2015

NI firms report a marked pick-up in business activity and new orders with employment growth continuing

NI Private Sector ActivityMonthly

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment

Source: Markit Economics & Ulster Bank NI PMI

ExpansionC

ontraction

UK & RoI continue to report robust rates of orders growth while NI firms post modest rates of expansion

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65


NI UK RoI


Orders increasing

Orders C

ontracting

Backlogs of work continue to grow in the UK & RoI but NI posts an 8th month of contraction

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

Export orders flat or falling in each of the last 7 months with £/€ exchange rate impacting on price competitiveness

NI New Export BusinessMonthly

20

30

40

50

60

70


New Export Orders No Change


Expansion

Contraction

PMI signals fastest rate of jobs growth in 7yrs in Q2 but rate of jobs growth eases sharply in H2-14 but rebounds in H1-15

NI Employment: PMI v QES**

35

40

45

50

55

60

2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2*

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

**QES is DFP's official Quarterly Employment Survey of the number of jobs in NI & includes public sector

Discontinuity in QES Series

Job Losses

Job gains

Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction. * average of April & May for PMI only

RoI firms report a pick-up in employment growth in May with NI & UK maintaining their April rates of growth

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Inflationary pressures remain subdued but have been picking up whereas output prices continue to fall

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80


Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services rising

Regional Comparisons

All UK regions report output growth in May

Output / Business ActivityMay 2015

50 = No change

60.9

52.751.9

55.8

40

45

50

55

60

65

NE Wal East Lon UK NW SE SW WM EM Y&H NI Scot RoI

PMI Index

ExpansionC

ontraction


Most of the UK regions posted strong rates of growth over the last 3 months but rates of growth weak for Scotland & NI

Output / Business Activity 3 months to May 2015

50 = No change

57.5

60.1

50.7

40

45

50

55

60

65

Lon NE Wal SE WM UK East Y&H NW SW EM Scot NI RoI

PMI Index


Expansion

Contraction

The RoI reported the fastest rate of growth in business activity over the last 12 months & Scotland the slowest

Output / Business Activity12 months to May 2015

50 = No change

53.2

57.6

60.4

44

47

50

53

56

59

62

65

NE Wal Lon SE WM East UK Y&H NW EM SW NI Scot RoI

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

The RoI posts the fastest rate of employment growth while Scotland records the slowest pace of job creation

Employment LevelsMay 2015

50 = No change

51.6

53.0

59.8

52.7

55.7

46

48

50

52

54

56

58

60

62

East Wal SW NW WM UK Lon Y&H EM NI SE NE Scot RoI

PMI Index

IncreasingD

ecreasing


NI & Scotland post the weakest rates of job creation within the UK over the last 3 months

Employment Levels3 months to May 2015

50 = No change

52.5

55.9

51.6

58.8

46

48

50

52

54

56

58

60

East WM Y&H SW Lon UK Wal NW EM SE NE NI Scot RoI

PMI Index

IncreasingD

ecreasing


Scotland, the North East & NI posted the weakest rates of jobs growth over the last year with the RoI the strongest

Employment Levels 12 months to May 2015

50 = No change

56.1

52.5

58.4

46

48

50

52

54

56

58

60

East WM Y&H UK Lon SW NW SE EM Wal Scot NI NE RoI

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

UK manufacturing & services output growth eases in May with construction reporting a pick-up in its growth rate

UK Business Activity / Output - PMIs

20

30

40

50

60

70

May-05 May-07 May-09 May-11 May-13 May-15

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of growth between Q1-13 & Q3-14. Growth eased in Q1 contrary to what the PMI signalled

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2007 Q4 2009 Q2 2010 Q4 2012 Q2 2013 Q4 2015 Q2*

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, * PMI refers to average of April & May

RoI output growth accelerates across all sectors in May

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction No Change


All sectors experienced weaker growth in H2-14 relative to H1-14 with H1-15 set to be even weaker

NI Private Sector Business Activity (PMI)

30

35

40

45

50

55

60

65

2006

H220

07H1

2007

H220

08H1

2008

H220

09H1

2009

H220

10H1

2010

H220

11H1

2011

H220

12H1

2012

H220

13H1

2013

H220

14H1

2014

H220

15H1*

PMI Index

Manufacturing Services Construction Retail ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI PMI, * refers to 5 months to May

NI’s manufacturing & services firms report a marked pick-up in output growth in May

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


Expansion

Contraction

Services, manufacturing & construction firms all reported employment growth during the last 3 months

NI PMI - Employment Index 3 month moving average

25

30

35

40

45

50

55

60

65


Manufacturing Services Construction


Job Gains

Job Losses

Manufacturing firms report a sharp slowdown in Q4-14 with a strong rebound in activity in the 3 months to May

NI Manufacturing Activity3 month moving average

25

30

35

40

45

50

55

60

65

70

Nov-03 Oct-05 Sep-07 Aug-09 Jul-11 Jun-13 May-15

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

RoI firms continue to post strong rates of output growth with NI firms reporting a pick-up in growth in April & May

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

NI firms report a significant rebound in new orders growth in April & May with RoI firms still outperforming UK & NI

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Until recently, NI had been outperforming most of its European competitors. But is now mid-table

Manufacturing Output - PMI

NI

20

30

40

50

60

70


RoI Italy Spain Greece NI France


C

ontractionExpansion

Input cost inflation picking up but remains subdued with output prices still falling

NI Manufacturing Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

PMI signals moderation in manufacturing jobs growth in H2- 14 & Q1-15 following record high in Q2 but rebound in Q2-15

NI Manufacturing Employment: PMI v QES**

30

35

40

45

50

55

60

65

2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2*

PMI Index

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

Q/Q



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. * refers to April & May average.

Service sector experiences a pick-up in output and orders growth but firms are hiring staff at a slower rate

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70


Business activity New Orders Employment

Source: Markit Economics & Ulster Bank

Grow

th acceleratingC

ontraction accelerating

RoI firms maintain strong rates of output growth but NI firms have experienced a marked slowdown in H1 2015

Services Output (excluding Retail)3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

NI firms fail to match the robust rates of growth in the UK & RoI with orders growth rising modestly over last 3 months

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI’s services firms report a pick-up in input cost inflation in May with pricing power returning

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


NI services firms increased their staffing levels over the last 3 months but below the rates of growth in the UK & RoI

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

Pace of job creation within the services sector eased in H2-14 but has picked up in H1-15

NI Services Employment: PMI v QES**

40

45

50

55

60

65

2005 Q2 2007 Q2 2009 Q2 2011 Q2 2013 Q2 2015 Q2*

PMI Index

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Q/Q



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. * average of April & May

NI retailers continue to report significant contractions in sales although the pace of decline in orders is slowing

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

NI retailers report discounting with output prices falling for the last 9 months. Input cost inflation at a 9-month high

NI Retail Input & Output Inflation3 month moving average

30

40

50

60

70

80

90


Input Costs Output Prices No Change

InflationD

eflation

Source: Markit Economics & Ulster Bank NI Profits squeeze

NI’s construction firms report a decline in activity and new orders but continue to increase staffing levels

NI Construction PMI3 month moving average

20

30

40

50

60

70


Output New Orders Employment

Source: Markit Economics, Ulster Bank PMI

ExpansionC

ontraction

50 = No change

Input cost inflation easing rapidly with output price inflation beginning to rise

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70


PMI Index

Input Prices Output Prices No Change


InflationD

eflation

NI’s construction PMI posts jobs growth since Q3 2013 but this is largely due to NI firms working outside of NI

NI Construction Employment: PMI v QES**

25

30

35

40

45

50

55

60

65

70

2005 Q2 2007 Q4 2010 Q2 2012 Q4 2015 Q2*

PMI Index

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

Q/Q


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. * average of April & May for PMI only

Strong rates of output growth amongst RoI firms with slowdown amongst UK firms & contraction with NI firms

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

NI orders decrease over last 3 months with UK growth slowing too. RoI firms reporting a pick-up in demand

Construction Sector New Orders - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

UK firms report a pick-up in housing & civil engineering activity in May with commercial activity easing

UK Construction Activity - PMIsMonthly

20

30

40

50

60

70


Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

UK sub-contractor rates recently rising at their fastest rate since the survey began as worker availability an issue

UK Construction PMI

20

30

40

50

60

70

80


Rates Charged By Sub-Contractors Availability of Sub-Contractors No Change


IncraesingD

ecreasing

UK construction firms remain more optimistic about the year ahead than at any time since February 2006

Future Business Activity Index - PMIs

20

30

40

50

60

70

80

90

100


Future Activity Long-Term Average


In 12mths time do you expect overall activity to be higher than now, lower, or the ?

RoI’s construction activity experiences a marked pick- up in demand in May across all sectors

Republic of Ireland Construction Activity - PMIMonthly

20

30

40

50

60

70


Housing Activity Commercial Activity Engineering Activity


ExpansionC

ontraction

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

RoI Construction PMI

20

30

40

50

60

70

80

90

100

May-00 Jan-02 Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 Sep-13 May-15

Rates Charged By Sub-Contractors Availability of Sub-Contractors


IncraesingD

ecreasing

RoI construction firms remain very optimistic about the year ahead

Future Business Activity Index - PMIs

20

30

40

50

60

70

80

90

100


RoI Future Activity RoI Long-Term Average


Optim

ismPessim

ism

In 12mths time do you expect overall activity to be higher than now, lower, or the ?

Slide 63

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