Slide pack, Ulster Bank NI PMI, June 2014

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

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

Republic of Ireland economic performance by sector

June 2014 Survey Update

Issued 15th

July 2014

Richard Ramsey

Chief Economist Northern Ireland

[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 manufacturing & services output growth picks up in June with services output at a 50-month high

Global Output - PMI

25

30

35

40

45

50

55

60

65

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

The Eurozone’s recovery loses some momentum with retail flat and construction still contracting

Eurozone PMIs: Output

2530

3540

4550

5560

65


Composite (M&S) Manufacturing Services

Construction Retail No Change

Source: Markit Economics Expansion

Contraction

The US, the UK & NI posted the fastest rates of manufacturing output growth in June

PMIs: Manufacturing Output June 2014

35 40 45 50 55 60 65 70 75

S.AfricaBrazil

S.KoreaFranceTurkey

AustraliaSingapore

RussiaGreece

ChinaPolandAustriaMexico

VietnamDenmark

JapanIndia

IndonesiaEZ

GermanySwitzerland

EUCanada

NetherlandsGlobal

ItalyN.Zealand*

IrelandCzech Republic

TaiwanSpain

NIUKUS

Source: Markit Economics Output Indices, *May

UK, NI & RoI

€

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

PMIs: Services Output June 2014

35 40 45 50 55 60 65

FranceJapan

RussiaAustralia

BrazilEZ

Emerging MarketsChina

ItalyEU

IndiaGermany

SpainGlobal

UKNI

USIreland

Source: Markit Economics Output Indices

€

Italy & Ireland saw an improvement in their composite PMIs in June. Meanwhile France’s contraction accelerates

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

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

The US & Chinese Composite PMIs improve in June


35

40

45

50

55

60

65

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

Eurozone US (Markit) China UK

Source: Markit Economics PMIs, US begins Jul-11

ExpansionC

ontraction

The US recovery continues with Japan & China reporting a pick-up in manufacturing activity in June

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Emerging markets post their strongest rate of growth in 15 months due primarily to a pick-up in China & India


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets


Contraction

Expansion

Australia’s services & manufacturing sectors remain ‘Down Under’ the 50 threshold in June

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

Firms in the UK & NI signal an easing in their rates of growth in output in June but growth remains strong

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Jun-04 Feb-06 Oct-07 Jun-09 Feb-11 Oct-12 Jun-14

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) in Q1 & Q2 2014

NI Private Sector Output Index Versus NI PMI

-6-5-4

-3-2-1012

345

2003 Q4 2005 Q2 2006 Q4 2008 Q2 2009 Q4 2011 Q2 2012 Q4 2014 Q2

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,Q4 2013 is latest data for NICEI

50 mark is the threshold for expansion / contraction with PMI

Expansion

Contraction

NI’s recovery took hold in the second half (H2) of 2013 with all indicators improving in (H1) 2014

NI Private Sector Performance (PMI)

30

35

40

45

50

55

60

65

2007

H120

07H2

2008

H120

08H2

2009

H120

09H2

2010

H120

10H2

2011

H120

11H2

2012

H120

12H2

2013

H120

13H2

2014

H1

PMI Index

Business Activity New Orders Employment Export Orders ExpansionC

ontraction

Source: Markit Economics & Ulster Bank NI PMI

The pace of growth in employment, new orders & output amongst NI firms eased in June from its recent highs

NI Private Sector ActivityMonthly

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment


ExpansionC

ontraction

NI order books were growing at a record rate in May but the pace of growth eased in June

Private Sector New OrdersMonthly

30

35

40

45

50

55

60

65


NI UK RoI

Source: Markit Economics & Ulster Bank NI

Orders increasing

Orders C

ontracting

Surge in demand has led to rising backlogs of work particularly within NI and RoI

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60


NI UK RoI


Increasing D

ecreasing

NI firms post their 12th successive monthly rise in export orders in June but the pace of growth slows

NI New Export Business

20

30

40

50

60

70


New Export Orders No Change


Expansion

Contraction

PMI signals the fastest rate of jobs growth in 7 years

NI Employment: PMI v QES*

35

40

45

50

55

60

2004 Q2 2006 Q2 2008 Q2 2010 Q2 2012 Q2 2014 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

Job creation accelerates in the UK & RoI with the pace of employment growth easing in NI

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Output cost inflation remains subdued

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80

Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14

Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services rising

Regional Comparisons

Strong growth across all UK regions & the RoI in June

Output / Business ActivityJune 2014

50 = No change

59.0 58.459.7

40

45

50

55

60

65

70

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

…all the UK regions & the RoI post strong rates of growth over the last 3 months…

Output / Business Activity 3 months to June 2014

50 = No change

60.5 58.9 60.0

40

45

50

55

60

65

70

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

PMI Index


Expansion

Contraction

… and over the last 12 months

Output / Business Activity12 months to June 2014

50 = No change

57.858.7

59.5

40

45

50

55

60

65

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

NI posts further job gains in June but rate of employment growth lags behind the UK and the RoI

Employment LevelsJune 201450 = No change

58.8

55.0

57.0

46

48

50

52

54

56

58

60

62

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

PMI Index

IncreasingD

ecreasing


Most UK regions (including NI) and the RoI post strong rates of employment growth over the last 3 months

Employment Levels3 months to June 2014

50 = No change

57.1 57.1

55.5

46

48

50

52

54

56

58

60

62

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

PMI Index

IncreasingD

ecreasing


The RoI posts the sharpest rise in employment levels over the last year

Employment Levels12 Months to June 2014

50 = No change

55.1

53.7

56.0

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

All UK sectors maintain strong rates of growth in June

UK Business Activity / Output - PMIs

20

30

40

50

60

70

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14

Services Manufacturing Construction


ExpansionC

ontraction

UK posts strong rates of economic growth between Q2 2013 & Q1 2014 with further growth expected in Q2

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2007 Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 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

RoI output growth accelerates within services but eases within manufacturing & construction

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction No Change


Contraction

Expansion

NI’s services & construction firms reported stronger rates of growth in output in H1 2014 relative to H2 2013

NI Private Sector Business Activity (PMI)

30

35

40

45

50

55

60

65

2007

H120

07H2

2008

H120

08H2

2009

H120

09H2

2010

H120

10H2

2011

H120

11H2

2012

H120

12H2

2013

H120

13H2

2014

H1PMI Index

Manufacturing Services Construction Retail

ExpansionC

ontraction


NI’s services and construction sectors saw output accelerate in Q2 relative to Q1…

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


Expansion

Contraction

…with all sectors 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


Manufacturing Services Construction

Source: Markit Economics &Ulster Bank NI PMI

Job Gains

Job Losses

Local firms report strong rates of growth in output & orders. Pace of jobs growth eases from recent record high

NI Manufacturing Activity3 month moving average

25

30

35

40

45

50

55

60

65

70

Jun-03 Apr-05 Feb-07 Dec-08 Oct-10 Aug-12 Jun-14

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

NI & UK manufacturing firms report an acceleration in output growth while the RoI sees its growth rate ease

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

All three economies signal an acceleration in new orders growth in Q2

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


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


RoI Italy Spain Greece NI


Contraction

Expansion

Pricing power eases as NI manufacturing firms report the weakest output price inflation since 2012

NI Manufacturing Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

The PMI is signalling the fastest rate of manufacturing employment growth in Q1 & Q2 since the PMI began

NI Manufacturing Employment: PMI v QES*

30

35

40

45

50

55

60

65

2004 Q2 2006 Q2 2008 Q2 2010 Q2 2012 Q2 2014 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


Service sector experiences a slowdown in its rates of growth in employment and new orders

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70

Jun-03 Apr-05 Feb-07 Dec-08 Oct-10 Aug-12 Jun-14

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

All 3 economies post strong rates of growth in services output in June with the RoI leading the way …

Services Output (excluding Retail)3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

…and very strong rates of new orders growth too

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

Service sector posts its first monthly rise in output prices in 5-months in June

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80

May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14

No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

Service sector employment growth remains strong across all 3 economies with NI jobs growth easing

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

In Q2 the services PMI showed its fastest rate of jobs growth since Q4 2007

NI Services Employment: PMI v QES*

40

45

50

55

60

65

2004 Q2 2006 Q2 2008 Q2 2010 Q2 2012 Q2 2014 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


NI retailers report a marked acceleration in sales and new orders in the 3 months to June

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


Expansion

Contraction

Local retailers report a pick-up in output cost inflation and an easing in input price inflation

NI Retail Input & Output Inflation3 month moving average

30

40

50

60

70

80

90


Input Costs Output Prices No Change

InflationD

eflation


Profits squeeze

NI’s construction sector reports record rates of growth in output & new orders in Q2 with employment also rising

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

…and output prices have been rising at a record rate

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70


PMI Index

Input Prices Output Prices No Change

Source: Markit Economics & Ulster Bank

InflationD

eflation

NI’s construction PMI posts its 4th successive quarterly rise in employment in Q2 but QES shows a fall in Q1

NI Construction Employment: PMI v QES*

20

25

30

35

40

45

50

55

60

65

2004 Q2 2006 Q4 2009 Q2 2011 Q4 2014 Q2

PMI Index

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

Q/Q



Job losses

Job gains

**QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms


Construction output growth remains strong in all three economies. Growth accelerating in NI in Q2

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

NI new orders growth hits a record high in Q2 and suggests significant work remains in the pipeline

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 within GB. House building has recently been expanding at its fastest rate in over 11 years

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Jun-05 Dec-06 Jun-08 Dec-09 Jun-11 Dec-12 Jun-14

Housing Activity Commercial Activity Civil Engineering Activity


ExpansionC

ontraction

…with opportunities returning within the RoI too

Republic of Ireland Construction Activity - PMI3 month moving average

20

30

40

50

60

70


Housing Activity Commercial Activity Engineering Activity

Source: Markit Economics & Ulster Bank

ExpansionC

ontraction

50 = No change

Slide 57

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Documents

Slide pack, Ulster Bank NI PMI, June 2014