Ulster Bank NI PMI Slide pack September 2013

Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

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

Republic of Ireland economic performance by sector

September 2013 Survey Update

Issued 14th

October 2013

Richard Ramsey

Chief Economist Northern Ireland

[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 slows in September due to the services sector…

Global Output - PMI

25

30

35

40

45

50

55

60

65

Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

… but the Eurozone experiences an acceleration in service sector activity with manufacturing growth slowing

Eurozone PMIs: Output

25

30

35

40

45

50

55

60

65

Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Composite (M&S) Manufacturing Services Construction

Source: Markit Economics Output Indices Expansion

Contraction

Top performers within manufacturing incl. US, UK & NI. Underperformers incl. France, S.Africa, Greece & India

PMIs: Manufacturing Output September 2013

35 40 45 50 55 60 65 70

S.AfricaGreeceFrance

IndiaS.KoreaVietnamAustralia

MexicoChina

IndonesiaBrazil

RussiaIsrael*

DenmarkSpain

SingaporeEZ

GermanyTaiwan

ItalyGlobal

CanadaEU

JapanAustriaIrelandTurkeyPoland

Czech RepublicN.Zealand*SwitzerlandNetherlands

NIUKUS

Source: Markit Economics Output Indices, *Aug, for the US ISM is used.

UK, NI & RoI

€

The UK, NI & Ireland post the fastest rate of service sector output growth in September

PMIs: Services Output September 2013

35 40 45 50 55 60 65

IndiaAustralia

SpainBrazil

Emerging MarketsFranceRussia

EZChina

ItalyJapanGlobal

GermanyEU

US*NI

IrelandUK

Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services

€

Three of the four largest economies within the eurozone are now expanding

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

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

Deceleration in the growth rates of China, UK, & the US with the rate of growth picking up in the Eurozone


35

40

45

50

55

60

65

Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13

Eurozone US (ISM) China UK

Source: Markit Economics PMIs, US includes construction

ExpansionC

ontraction

The US & Japan posted an acceleration in manufacturing activity in September

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13

US (ISM) China Japan Eurozone


Contraction

Expansion

Russia & Brazil post expansion but pace of contraction accelerates in India


30

35

40

45

50

55

60

65


Brazil Russia India Emerging Markets No Change


Contraction

Expansion

… with Australia’s service sector still contracting though manufacturing returned to growth

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

NI, UK & the RoI all post strong rates of growth in September

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13

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 new private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q2 &Q3 2013

NI Private Sector Output Index Versus NI PMI

-6-5-4

-3-2-1012

345

2003 Q1 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3

PSO Q/Q%

30

35

40

45

50

55

60

65

PMI NICEI Left Hand Scale PMI Right Hand Scale

Source: New DFP Northern Ireland Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI

50 mark is the threshold for expansion / contraction with PMI

Expansion

Contraction

NI firms report an increase in business activity, new orders & employment in September

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

Forward looking indicators suggest more growth in all three economies in the months ahead

Private Sector New Orders3 month moving average

30

35

40

45

50

55

60

65

Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 Sep-13

NI UK RoI


Orders increasing

Orders C

ontracting

Surge in demand is leading to backlogs of work

Private Sector Backlogs3 month moving average

30

35

40

45

50

55

60

Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 Sep-13

NI UK RoI


Increasing D

ecreasing

NI firms post their 3rd successive increase in export orders in September

NI New Export BusinessMonthly

20

25

30

35

40

45

50

55

60

65

Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13

New Export Orders No Change

Source: Markit Economics & Ulster Bank

Grow

th Acceleratin g

Contraction A

ccelerating

PMI underestimated job gains in 2012 (relative to official jobs survey). PMI signals another quarter of employment growth in Q3 2013

NI Employment: PMI v QES*

35

40

45

50

55

60

Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Sep-13

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

Discontinuity in QES Series

Job losses

Job gains

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

Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages

Firms within the UK, RoI & NI all experience job gains in September but the pace of growth eases for NI

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60

Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

NI UK RoI


Job Gains

Job Losses

Private sector’s profitability squeeze remains

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80


Output Prices Input Prices No Change

InflationD

eflation

Source: Markit Economics & Ulster Bank NI

Profits squeeze

Price of goods & services falling

Regional Comparisons

PMIs experience an Indian summer in September with strong growth reported everywhere…

Output / Business ActivitySeptember 2013

50 = No change

58.7

55.7

60.4

40

45

50

55

60

65

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

PMI index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

… all the UK regions post growth over the last 3 months

Output / Business Activity Q3 2013

50 = No change

57.7

56.0

60.2

40

45

50

55

60

65

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

PMI Index


Expansion

Contraction

…but NI is the only UK region to post a decline in output over the last 12 months

Output / Business Activity 12 months to September 2013

50 = No change

53.9

53.2

49.5

40

45

50

55

60

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

PMI index

ExpansionC

ontraction


All the UK regions and the Republic of Ireland post employment growth in September …

Employment LevelsSeptember 2013

50 = No change

53.6

54.8

51.4

44

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasing


… and over the last 3 months to September

Employment LevelsQ3 2013

50 = No change

51.4

52.3

54.5

44

46

48

50

52

54

56

58

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

PMI Index

IncreasingD

ecreasing


NI posts the steepest decline in employment & RoI the sharpest rise over the last 12 months

Employment Levels12 months to September 2013

50 = No change

51.1

52.6

48.9

42

44

46

48

50

52

54

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

PMI Index

IncreasingD

ecreasing


Sectoral Comparisons

All three broad UK sectors maintain strong rates of growth in September

UK Business Activity / Output - PMIs

20

30

40

50

60

70


Services Manufacturing Construction


ExpansionC

ontraction

UK economic growth accelerates in Q2 & Q3

UK GDP versus UK Composite PMIUK Composite includes Construction

25

30

35

40

45

50

55

60

65

2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3

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, * refers to July & August

All three sectors of the RoI economy post growth (>50) for the first time since May 2007

RoI Business Activity - PMIsMonthly

20

25

30

35

40

45

50

55

60

65


Manufacturing Services Construction No Change


ExpansionC

ontraction

All three broad sectors in NI reported increased levels of business activity in Q3…

NI Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65


Manufacturing Services Construction


Expansion

Contraction

…with all sectors also reporting job gains over the last 3 months

NI PMI - Employment Index 3 month moving average

25

30

35

40

45

50

55

60

65

Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Manufacturing Services Construction


Job Gains

Job Losses

NI’s manufacturing sector posts an acceleration in jobs growth, output & new orders over the last 3 months

NI Manufacturing Activity3 month moving average

25

30

35

40

45

50

55

60

65


Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

The UK, RoI and NI all witness an acceleration in manufacturing output during the last 3 months

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

The UK posts the strongest growth in new orders

Manufacturing New Orders3 month moving average

25

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

N.Ireland is outperforming its European competitors

Manufacturing Output - PMI

20

30

40

50

60

70


RoI Italy Spain Greece NI


Contraction

Expansion

Cost price inflation remains for local manufacturing firms but pricing power is improving too

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 underestimated manufacturing job surge in Q2. PMI suggests further job gains in Q3 2013

NI Manufacturing Employment: PMI v QES*

30

35

40

45

50

55

60

65


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

Recent growth in NI service sector output / orders is feeding through into higher levels of employment…

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70


Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

All three economies post an acceleration in output growth in Q3 2013…

Services Output 3 month moving average

30

35

40

45

50

55

60

65

70


UK NI RoI No Change


Contraction

Expansion

… and strong new orders growth in the same three economies

Services New Orders (excluding Retail ) 3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

Pricing power remains very weak amongst NI’s services sector whilst inflationary pressures remain

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80


No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

…with employment growth accelerating in the RoI and NI in Q3 2013

Services Employment3 month moving average

30

35

40

45

50

55

60

65


UK RoI NI No Change


Contraction

Expansion

In Q3 the services PMI finally shows quarterly employment growth for the first time since Q1 2008

NI Services Employment: PMI v QES*

40

45

50

55

60

65


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


Retailers summer boom extends into September

Northern Ireland Retail PMI3 monthly average

25

35

45

55

65

75


Business Activity New Orders Backlogs No Change


ExpansionC

ontraction

Profits squeeze on local retailers eases significantly due to increased pricing power

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 narrowing

NI construction sector reports growth in output, new orders and employment over the last 3 months

NI Construction PMI3 month moving average

20

30

40

50

60

Mar-09 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13

Output New Orders Employment

Source: Markit Economics, Ulster Bank PMI

ExpansionC

ontraction

50 = No change

…but the profits squeeze continues

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 posted its first quarter of employment growth in Q3 2013 since Q4 2007

NI Construction Employment: PMI v QES

20

25

30

35

40

45

50

55

60

65


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


UK (58.9), NI (56.2) & RoI (55.7) construction sectors all post healthy rates of growth in September

Construction Sector Output - PMI3 month moving average

20

30

40

50

60


PMI Index

NI UK RoI


ExpansionC

ontraction

New orders rising in all three economies

Construction Sector New Orders - PMI3 month moving average

20

30

40

50

60


PMI Index

NI UK RoI


ExpansionC

ontraction

Opportunities for NI firms within GB market. House building sector expanding at its fastest rate in almost 10 years…

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

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

Mar-07 Apr-08 May-09 Jun-10 Jul-11 Aug-12 Sep-13

Housing Activity Commercial Activity Engineering Activity


ExpansionC

ontraction

50 = No change

Slide 55

Disclaimer

This document is intended for clients of Ulster Bank Limited and Ulster Bank Ireland Limited (together and separately, "Ulster Bank")

and is not intended for any other person.

It does not constitute an offer or invitation to purchase or sell any instrument or to provide any service in any jurisdiction where the required authorisation is not held.

Ulster Bank and/or its associates and/or its employees may have a position or engage in transactions in any of the instruments mentioned.

The information including any opinions expressed and the pricing given,

is indicative,

and constitute our judgement at time of publication and are subject to change without notice.

The information contained herein should not be construed as advice,

and is not intended to be construed as such.

This publication provides only a brief review of the complex issues discussed and recipients should not rely on information contained here without seeking specific advice on matters that concern them.

Ulster Bank make no representations or warranties with respect to the information and disclaim all liability for use the recipient or their advisors make of the information.

Over-the-counter (OTC) derivates can involve a number of significant and complex risks which are dependent on the terms of the particular transaction and your circumstances. In the event the market has moved against the transaction you have undertaken, you may incur substantial costs if you wish to close out your position.

Calls may be recorded.

Technology

Ulster Bank NI PMI Slide pack September 2013