Slide pack , Ulster Bank Northern Ireland PMI, March 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

March 2015 Survey Update

Issued 13th

April 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 for both manufacturing and services picks up in March to a 6-month high

Global Output - PMI

25

30

35

40

45

50

55

60

65

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

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

EZ manufacturing & service sector growth picks up with retail & construction still in contraction mode

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 Q1 2015

EZ GDP versus EZ Composite PMIComposite excludes construction

20

30

40

50

60

70

2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1

PMI Index

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

GDP % Q/Q

GDP Q/Q PMI

Source: Bloomberg & Markit Economics

EZ Q4-14 GDP 0.3%

The UK & RoI are ranked 3rd & 4th in terms of manufacturing output growth performance in March

PMIs: Manufacturing Output March 2015

35 40 45 50 55 60 65 70 75

IndonesiaBrazil

S.AfricaTurkey

AustraliaAustriaFranceRussia

CanadaS.KoreaGreece

SwitzerlandNI

SingaporeTaiwan

ChinaN.Zealand*

JapanVietnam

NetherlandsGlobal

EZIndia

EUItaly

MexicoCzech Republic

GermanySpain

PolandIreland

UKUS

Denmark

Source: Markit Economics Output Indices, *February

UK, RoI & NI€

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

PMIs: Services Output March 2015

35 40 45 50 55 60 65

RussiaBrazilJapan

ItalyEmerging Markets

ChinaFrance

NIAustralia

IndiaEZ

GlobalEU

GermanyDeveloped Markets

SpainUK

US*Ireland

Source: Markit Economics Output Indices

€

Germany, Italy, Spain & the UK all report an acceleration in their respective growth rates in March

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

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

US (Markit PMI not ISM), EZ & UK PMIs posted a pick up in growth in March. Japan saw a contraction in growth


30

35

40

45

50

55

60

65

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

Eurozone US (Markit) China Japan UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

The US ISM points to a significant slowdown in manufacturing activity in recent months

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

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

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Diverging performance within Emerging Markets with Brazil returning to contraction with Russia


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets


Contraction

Expansion

Australia’s services & manufacturing sectors on both sides of the 50 threshold in March

Australia - PMI

30

35

40

45

50

55

60

65

Mar-07 Mar-09 Mar-11 Mar-13 Mar-15

Manufacturing Services No Change


Contraction

Expansion

NI posts its 1st month of expansion, albeit marginal, in 4 months but still lags behind the UK & RoI

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Mar-03 Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-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 (combines indices for construction, services, agriculture & industrial production) throughout 2014

NI Private Sector Output Index Versus NI PMI

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

012345

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1

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.

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’s recovery took hold in H2-13 with all indicators improving in H1-14 but easing in H2-14 & 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 Q1 2015

NI firms reporting simultaneous growth in employment, output and orders for the first time since November

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

ExpansionContraction

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

Private Sector New OrdersMonthly

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 a 6th month of contraction as activity slows

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 5 months

NI New Export BusinessMonthly

20

30

40

50

60

70


New Export Orders No Change


ExpansionC

ontraction

PMI signals the fastest rate of jobs growth in 7 yrs in Q2 with the rate of job creation easing sharply & levelling off

NI Employment: PMI v QES**

35

40

45

50

55

60

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1

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.

Employment growth eases in March for all 3 economies

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Inflationary pressures remain subdued with output prices still falling

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

Regional Comparisons

Scotland was the only UK region to see a contraction in output in March

Output / Business ActivityMarch 2015

50 = No change

49.4

50.2

59.658.7

40

45

50

55

60

65

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

PMI Index

ExpansionC

ontraction


Most of the UK regions & the RoI posted strong rates of growth in Q1 with only NI & Scotland contracting

Output / Business Activity Q1 2015

50 = No change

60.2

49

57.5

40

45

50

55

60

65

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

PMI Index


ExpansionC

ontraction

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

Output / Business Activity12 months to March 2015

50 = No change

55.0

58.0

60.4

44

47

50

53

56

59

62

65

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

The RoI posts the fastest rate of employment growth in March while NI records the slowest pace of job creation

Employment LevelsMarch 201550 = No change

51.5

59.1

46

48

50

52

54

56

58

60

62

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

PMI Index

IncreasingD

ecreasing


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

Employment LevelsQ1 2015

50 = No change

51.3

56.6

51.1

59

46

48

50

52

54

56

58

60

WM Lon East Y&H UK SE NW SW Wal EM 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 March 2015

50 = No change

56.2

53

58.1

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

UK manufacturing & services sectors report an acceleration in output growth in March

UK Business Activity / Output - PMIs

20

30

40

50

60

70

Mar-05 Mar-07 Mar-09 Mar-11 Mar-13 Mar-15

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of economic growth between Q1- 13 & Q3-14. Growth eased in Q4 but picks up in Q1-15

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1

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

RoI output growth across all sectors but a marked slowdown in the pace of growth in construction output

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction No Change


Contraction

Expansion

All sector’s 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 Q1

All sectors experienced a rapid slowdown in output growth in H2 with services outperforming the other sectors

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 in Q1 2015

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 signs of stabilisation / recovery in Q1-15

NI Manufacturing Activity - PMI3 month moving average

25

30

35

40

45

50

55

60

65


Business activity New Orders Employment


Grow

th C

ontraction

RoI firms continue to post strong rates of output growth UK posted a marked pick-up with NI lagging behind

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Slowdown in orders growth has been marked amongst NI manufacturing firms with a pick-up in March

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 remains close to a 6-year low. Output prices falling at their fastest rate in over 5 years

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 a moderation in manufacturing employment growth in H2-14 & Q1-15 following record high in Q2

NI Manufacturing Employment: PMI v QES**

30

35

40

45

50

55

60

65

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1

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


Service sector experiences a slowdown in output & orders growth in Q1 but jobs growth accelerates

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 Q1 2015

Services Output (excluding Retail)3 month moving average

30

40

50

60

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 flat in January & February

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 & output cost inflation in March

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

NI services firms increased their staffing levels in March but well 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 Q1-15

NI Services Employment: PMI v QES**

40

45

50

55

60

65

2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1

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


NI retailers starting 2015 the way 2014 ended with output & orders still contracting at a rapid rate

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

Local retailers report heavy discounting with output prices falling at rates seen in mid-2009

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

Since Q2-14’s record rates of growth, NI’s construction firms report a significant easing in their rates of growth

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 broadly flat

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70


PMI IndexInput 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 Q1 2007 Q3 2010 Q1 2012 Q3 2015 Q1

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


Strong rates of output growth amongst UK firms with slowdown amongst RoI 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 fall marginally in Q1 with RoI growth slowing too. UK 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

Opportunities for NI firms with civil engineering activity reporting a pick-up in Q1 2015

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70


Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

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

RoI Construction PMI

20

30

40

50

60

70

80

90

100

Mar-00 Nov-01 Jul-03 Mar-05 Nov-06 Jul-08 Mar-10 Nov-11 Jul-13 Mar-15

Rates Charged By Sub-Contractors Availability of Sub-Contractors


IncraesingD

ecreasing

UK construction firms are 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


Optim

ismPessim

ism

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

RoI’s construction activity experiences a marked slowdown from recent highs across all sectors

Republic of Ireland Construction Activity - PMI3 month moving average

20

30

40

50

60

70


Housing Activity Commercial Activity Engineering Activity


ExpansionC

ontraction

50 = No change

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

Mar-00 Nov-01 Jul-03 Mar-05 Nov-06 Jul-08 Mar-10 Nov-11 Jul-13 Mar-15

Rates Charged By Sub-Contractors Availability of Sub-Contractors


IncraesingD

ecreasing

Despite slowdown in construction sector activity, 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 same?

Slide 63

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