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Slide pack for the Ulster Bank Northern Ireland Purchasing Managers Index (PMI), October 2014 Survey (Update Issued 10th November 2014) Includes 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
October 2014 Survey Update
Issued 10th
November 2014
Richard Ramsey
Chief Economist Northern Ireland
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 eases to a 6-month low in October due largely to slowdown in the services sector
Global Output - PMI
25
30
35
40
45
50
55
60
65
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Total Manufacturing Services
Source: Markit Economics
ExpansionC
ontraction
EZ services sector growth remains sluggish, modest pick- up in manufacturing with retail & construction contracting
Eurozone PMIs: Output
25
30
35
40
45
50
55
60
65
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Composite (M&S) Manufacturing Services
Construction Retail No Change
Source: Markit Economics Expansion
Contraction
The EZ’s composite PMI has suggested economic growth in Q2 & Q3 whereas GDP was flat in Q2
EZ GDP versus EZ Composite PMIComposite excludes construction
2025303540455055606570
2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*
PMI Index
-3-2.5-2-1.5-1-0.500.511.52
GDP % Q/Q
GDP Q/Q PMI
Source: Bloomberg & Markit Economics, * October only
EZ Q2-14 GDP 0%
NI & RoI manufacturing firms are outperforming most of their international competitors in terms of output growth
PMIs: Manufacturing Output October 2014
35 40 45 50 55 60 65 70 75
AustriaFrance
IndonesiaS.Korea
BrazilGreece
ItalyS.Africa
ChinaVietnamAustralia
EZPoland
EURussiaJapan
GermanyTaiwanTurkey
SingaporeGlobal
IndiaMexico
UKNetherlands
SpainCanada
Czech RepublicNI
USIreland
N.Zealand*Switzerland
Denmark
Source: Markit Economics Output Indices, *September
UK, NI & RoI
€
The Republic of Ireland, US & UK posted the fastest rates of service sector output growth in October
PMIs: Services Output October 2014
35 40 45 50 55 60 65
AustraliaRussia
BrazilFranceJapanIndiaItaly
Emerging MarketsEZ
ChinaEU
GlobalNI
Developed MarketsGermany
SpainUK
US*Ireland
Source: Markit Economics Output Indices
€
Spain & Ireland post an acceleration in growth in October, Italy returns to growth but France still in contraction mode
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
25
30
35
40
45
50
55
60
65
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Source: Markit Economics PMIs
Contraction
Expansion
The US, UK & Chinese Composite PMIs all record an easing in their growth rates & Japan contracts in October
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
30
35
40
45
50
55
60
65
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Eurozone US (Markit) China Japan No Change UK
Source: Markit Economics PMIs, US begins Jul-11
ExpansionC
ontraction
The US continues to enjoy a robust manufacturing recovery remains whilst the EZ approaches stagnation
Manufacturing PMIs
25
30
35
40
45
50
55
60
65
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
US (ISM) China Japan Eurozone No Change
Source: Markit Economics
Contraction
Expansion
Emerging markets growth slips to a 5-month low with Brazil & Russia in contraction mode
Composite PMIs (Manufacturing & Services ** Excludes Construction**)
30
35
40
45
50
55
60
65
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Brazil Russia India Emerging Markets
Source: Markit Economics
Contraction
Expansion
Australia’s services & manufacturing sectors remain ‘Down Under’ the 50 threshold in October
Australia - PMI
30
35
40
45
50
55
60
65
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Manufacturing Services No Change
Source: Markit Economics PMIs
Contraction
Expansion
Firms in the UK & NI signal their slowest rates of growth in business activity since June 2013
Private Sector Business Activity - PMIs
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
NI UK RoI
Source: Markit & Ulster Bank NI PMI50 = threshold between expansion / contraction
ExpansionC
ontraction
**PMI Surveys Exclude Agriculture & Public Sector**
PMI suggests growth in DFP’s private sector composite index (combines indices for construction, services, agriculture & industrial production) throughout 2014
NI Private Sector Output Index Versus NI PMI
-6-5-4
-3-2-1012
345
2004 Q2 2005 Q4 2007 Q2 2008 Q4 2010 Q2 2011 Q4 2013 Q2 2014 Q4*
NICEI Q/Q%
30
35
40
45
50
55
60
65
PMI 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, * refers to October for PMI
50 mark is the threshold for expansion / contraction with PMI Expansion
ContractionE i
NI’s recovery took hold in H2 of 2013 with all indicators improving in H1 2014 but easing in H2 2014*
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
H2*
PMI Index
Business Activity New Orders Employment Export Orders
ExpansionC
ontraction
Source: Markit Economics & Ulster Bank NI PMI, * refers to 4 months to October
The pace of growth in output, new orders & employment continues to slow
NI Private Sector ActivityMonthly
30
35
40
45
50
55
60
65
70
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Business Activity New Business Employment
Source: Markit Economics & Ulster Bank NI PMI
ExpansionC
ontraction
RoI order books are growing at their fastest rate in >14 yrs but the pace of growth eases in NI & UK
Private Sector New Orders3 month moving average
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
NI UK RoI
Source: Markit Economics & Ulster Bank NI
Orders increasing
Orders C
ontracting
Following a surge in backlogs of work, notably within NI, outstanding work eases to a 13-mth low in October
Private Sector Backlogs3 month moving average
30
35
40
45
50
55
60
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
NI UK RoI
Source: Markit Economics & Ulster Bank NI PMI
Increasing D
ecreasing
NI firms post their 16th successive monthly rise in export orders in October but the pace of growth slows
NI New Export Business3 month moving average
25
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Export Orders No Change
Source: Markit Economics & Ulster Bank NI PMI
Grow
th Accelerating
Contraction A
ccelerating
PMI signals the fastest rate of jobs growth in 7 years in Q2 with the pace of job creation easing in Q3/Q4
NI Employment: PMI v QES**
35
40
45
50
55
60
2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*
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. * refers to October only
Job creation accelerates in the RoI in October but the pace of jobs growth slows to an 11-mth low for NI
Private Sector Employment LevelsMonthly
30
35
40
45
50
55
60
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
NI UK RoI
Source: Markit Economics & Ulster Bank NI PMI
Job Gains
Job Losses
Inflationary pressures easing with output prices falling
NI Private Sector Profit Squeeze3 Month Moving Average
30
40
50
60
70
80
Oct-04 Oct-06 Oct-08 Oct-10 Oct-12 Oct-14
Output Prices Input Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
Price of goods & services
Regional Comparisons
NI is slipping down the regional league table as far as business output growth is concerned
Output / Business ActivityOctober 201450 = No change
54.756.4
60.4
40
45
50
55
60
65
70
WM Wal SE Y&H EM East UK NW NE NI Lon Scot SW RoI
PMI Index
ExpansionC
ontractionSource: Markit Economics & Ulster Bank NI PMI
Most of the UK regions & the RoI post strong rates of growth over the last 3 months…
Output / Business Activity 3 months to October 2014
50 = No change
56.3
60.858.1
40
45
50
55
60
65
70
Y&H East WM SE NW EM UK Wal NE Lon NI SW Scot RoI
PMI Index
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
… and over the last 12 monthsOutput / Business Activity
12 months to October 201450 = No change
58.8 59.158.5
44
47
50
53
56
59
62
65
SE NE Lon WM East EM UK Wal SW NI NW Y&H Scot RoI
PMI Index
ExpansionC
ontractionSource: Markit Economics & Ulster Bank NI PMI
NI posts further job gains in October but lags behind the UK & the RoI. The North East posts job losses
Employment LevelsOctober 2014
50 = No change
55.9
58.3
52.2
46
48
50
52
54
56
58
60
Y&H East Lon SW EM UK WM Wal SE NW Scot NI NE RoI
PMI Index
IncreasingD
ecreasing
Source: Markit Economics & Ulster Bank NI PMI
Most UK regions and the RoI post strong rates of employment growth over the last 3 months
Employment Levels3 months to October 2014
50 = No change
53.1
55.8
56.9
46
48
50
52
54
56
58
60
Y&H East WM SW UK EM Wal Lon SE NW Scot NI NE RoI
PMI Index
IncreasingD
ecreasing
Source: Markit Economics & Ulster Bank NI PMI
The RoI, London, the East & North West of England posted the sharpest rates of job creation over the last year
Employment Levels12 Months to October 2014
50 = No change
55.8
54.2
56.9
46
48
50
52
54
56
58
East Lon NW SW UK Y&H SE WM NI EM Scot Wal NE RoI
PMI Index
IncreasingD
ecreasingSource: Markit Economics & Ulster Bank NI PMI
Sectoral Comparisons
UK services & construction disappointing expectations with manufacturing posting an acceleration in growth
UK Business Activity / Output - PMIs
20
30
40
50
60
70
Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Services Manufacturing Construction
Source: Markit Economics
ExpansionC
ontraction
UK posts strong rates of economic growth between Q1-13 & Q3-14 with further strong growth expected in Q4-14
UK GDP versus UK Composite PMIUK Composite includes Construction
25
30
35
40
45
50
55
60
65
2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014Q4*
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, * Q4 refers to October only
RoI output growth accelerates within manufacturing & construction but eases within the services sector
RoI Business Activity - PMIsMonthly
20
25
30
35
40
45
50
55
60
65
70
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Manufacturing Services Construction No Change
Source: Markit Economics
Contraction
Expansion
NI’s manufacturing sector is the only sector posting a stronger rate of growth in output in H2*-14 than H1-14
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
H2*PMI Index
Manufacturing Services Construction Retail ExpansionC
ontraction
Source: Markit Economics & Ulster Bank NI PMI, * refers to 4 months to October
Output growth within NI’s services & construction continues to slow but still remains at robust rates
Northern Ireland Private Sector Output 3 month moving average
30
35
40
45
50
55
60
65
70
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Manufacturing Services Construction
Source: Markit Economics & Ulster Bank NI PMI
Expansion
Contraction
…with construction & services reporting an easing in the rates of employment growth over the last 3 months
NI PMI - Employment Index 3 month moving average
25
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Manufacturing Services Construction
Source: Markit Economics & Ulster Bank NI PMI
Job Gains
Job Losses
NI’s manufacturing firms continue to report robust rates of growth in output, orders & job creation
NI Manufacturing Activity - PMI3 month moving average
25
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Business activity New Orders Employment
Source: Markit Economics & Ulster Bank NI PMI
Grow
th C
ontraction
NI & RoI firms have maintained strong rates of growth in manufacturing output while the growth rate eases in the UK
Manufacturing Output3 month moving average
30
35
40
45
50
55
60
65
Oct-04 Oct-06 Oct-08 Oct-10 Oct-12 Oct-14
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
Strong rates of manufacturing orders growth amongst NI & RoI firms but marked slowdown for UK firms
Manufacturing New Orders3 month moving average
25
30
35
40
45
50
55
60
65
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
NI has been outperforming some of its European competitors for most of the last 12 months
Manufacturing Output - PMI
20
30
40
50
60
70
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
RoI Italy Spain Greece NI France
Source: Markit Economics PMIs
C
ontractionExpansion
Input cost inflation rising at its weakest rate in 28 months with NI manufacturing firms reporting a fall in prices
NI Manufacturing Input & Output Inflation3 month moving average
30
40
50
60
70
80
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
No Change Input Costs Output Prices
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
The PMI is signalling a moderation in manufacturing employment growth in Q3/Q4 following record high in Q2
NI Manufacturing Employment: PMI v QES**
30
35
40
45
50
55
60
65
2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*
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. * refers to October only
Service sector experiences a slowdown in its rates of growth in output, employment & new orders
NI Service Sector (excludes Retail)3 month moving average
30
35
40
45
50
55
60
65
70
Oct-03 Aug-05 Jun-07 Apr-09 Feb-11 Dec-12 Oct-14
Business activity New Orders Employment
Source: Markit Economics & Ulster Bank NI
Grow
th acceleratingC
ontraction accelerating
RoI firms report an acceleration in their rates of output growth whilst output growth for UK & NI firms eases
Services Output (excluding Retail)3 month moving average
30
35
40
45
50
55
60
65
70
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
…but NI firms report a marked slowdown in the rate of new orders growth in Q3 & Q4 (October)
Services New Orders (excluding Retail ) 3 month moving average
30
40
50
60
70
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
UK NI RoI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
NI’s service sector is experiencing an easing in inflationary pressures
NI Services Input & Output Inflation3 month moving average
30
40
50
60
70
80
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
No Change Input Costs Output Prices
InflationD
eflation
Source: Markit Economics & Ulster Bank NI PMI
Profits squeeze
Service sector employment growth eases in NI & UK in Q3 & Q4 (October) but remains very strong in the RoI
Services Employment3 month moving average
30
35
40
45
50
55
60
65
Oct-04 Oct-06 Oct-08 Oct-10 Oct-12 Oct-14
UK RoI NI No Change
Source: Markit Economics & Ulster Bank NI PMI
Contraction
Expansion
In Q2 the services PMI showed its fastest rate of jobs growth since Q4 2007. Pace of job creation eases in Q3/Q4
NI Services Employment: PMI v QES**
40
45
50
55
60
65
2004 Q4 2006 Q4 2008 Q4 2010 Q4 2012 Q4 2014 Q4*
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. * refers to October only
NI retailers report a much, much weaker Q3 relative to a bumper Q2 (boosted by Giro D’Italia)
Northern Ireland Retail PMI3 monthly average
25
35
45
55
65
75
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Business Activity New Orders Backlogs No Change
Source: Markit Economics & Ulster Bank NI
Expansion
Contraction
Local retailers report output price deflation with prices falling at their fastest rate since June 2009
NI Retail Input & Output Inflation3 month moving average
30
40
50
60
70
80
90
Oct-04 Jun-06 Feb-08 Oct-09 Jun-11 Feb-13 Oct-14
Input Costs Output Prices No Change
InflationD
eflation
Source: Markit Economics & Ulster Bank NI Profits squeeze
Following Q2’s record rates of growth, NI’s construction firms report an easing in their rates of growth in Q3/Q4
NI Construction PMI3 month moving average
20
30
40
50
60
70
Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Output New Orders Employment
Source: Markit Economics, Ulster Bank PMI
ExpansionC
ontraction
50 = No change
…but input cost inflation remains very high
NI Construction Sector Profits Squeeze3 month moving average
20
30
40
50
60
70
Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
PMI IndexInput Prices Output Prices No Change
Source: Markit Economics & Ulster Bank
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**
20
25
30
35
40
45
50
55
60
65
2004 Q4 2007 Q2 2009 Q4 2012 Q2 2014 Q4*
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. * refers to October only
Strong rates of output growth amongst UK, NI & RoI firms although pace of growth has eased for NI firms
Construction Sector Output - PMI3 month moving average
20
30
40
50
60
70
Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
PMI Index
NI UK RoI
Source: Markit Economics
ExpansionC
ontraction
Growth in NI orders eases from record high but remains strong in Q3/Q4 suggesting more work in the pipeline
Construction Sector New Orders - PMI3 month moving average
20
30
40
50
60
70
Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
PMI Index
NI UK RoI
Source: Markit Economics
ExpansionC
ontraction
Opportunities for NI firms. Housing activity has recently increased at its fastest rate since June 1997
UK Construction Activity - PMIs3 month moving average
20
30
40
50
60
70
Oct-05 Apr-07 Oct-08 Apr-10 Oct-11 Apr-13 Oct-14
Housing Activity Commercial Activity Civil Engineering Activity
Source: Markit Economics
ExpansionC
ontraction
…with an increasing number of opportunities within the RoI too
Republic of Ireland Construction Activity - PMI3 month moving average
20
30
40
50
60
70
Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14
Housing Activity Commercial Activity Engineering Activity
Source: Markit Economics & Ulster Bank
ExpansionC
ontraction
50 = No change
Slide 58
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