Slide pack , Ulster Bank Northern Ireland PMI, December 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

December 2014 Survey Update

Issued 12th

January 2015

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 output growth eases to a 14-month low

Global Output - PMI

25

30

35

40

45

50

55

60

65

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

Total Manufacturing Services

Source: Markit Economics

ExpansionC

ontraction

Eurozone manufacturing sector growth eases with retail & construction output still contracting

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 easing in Q4

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

EZ Q3-14 GDP 0.2%

Top, middle and near the bottom describes the relative manufacturing output performance of the RoI, UK & NI

PMIs: Manufacturing Output December 2014

35 40 45 50 55 60 65 70 75

FranceAustralia

IndonesiaNI

TaiwanS.Korea

BrazilItaly

SingaporeChina

RussiaAustriaGreece

EZEU

GermanyTurkeyGlobal

UKJapan

VietnamDenmark

Czech RepublicNetherlands

SpainUS

PolandCanada

S.Africa*SwitzerlandN.Zealand*

IndiaMexicoIreland

Source: Markit Economics Output Indices, *November

RoI, UK & NI

€

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

PMIs: Services Output December 2014

35 40 45 50 55 60 65

RussiaAustralia

BrazilItaly

FranceIndia

EZJapan

Emerging MarketsGermany

GlobalDeveloped Markets

EUNI

US*ChinaSpain

UKIreland

Source: Markit Economics Output Indices

€

Ireland, Spain & Germany post an acceleration in growth in December, with Italy & France still in contraction mode

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

25

30

35

40

45

50

55

60

65


Source: Markit Economics PMIs

Contraction

Expansion

The US & UK Composite PMIs post a marked slowdown in December with Japan reporting a pick-up in activity


30

35

40

45

50

55

60

65

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-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 whilst the EZ continues to flirt with stagnation

Manufacturing PMIs

25

30

35

40

45

50

55

60

65

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

US (ISM) China Japan Eurozone No Change


Contraction

Expansion

Emerging markets growth rises to a 3-month high with Brazil & Russia still in contraction mode


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 December

Australia - PMI

30

35

40

45

50

55

60

65


Manufacturing Services No Change


Contraction

Expansion

NI records its first month of contraction, albeit marginal, since mid-2013

Private Sector Business Activity - PMIs

30

35

40

45

50

55

60

65

Dec-04 Aug-06 Apr-08 Dec-09 Aug-11 Apr-13 Dec-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

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

ContractionE i

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 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

The pace of growth in output, new orders & employment continued to slow in December

NI Private Sector ActivityMonthly

30

35

40

45

50

55

60

65

70


Business Activity New Business Employment


ExpansionC

ontraction

NI order books are growing at their weakest rate in 19 months but are still increasing

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 a 3rd 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 in December following November’s first monthly decline in 17 months

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 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.

Job creation accelerates at a record rate in the RoI but the pace of jobs growth slows to an 18-mth low for NI

Private Sector Employment LevelsMonthly

30

35

40

45

50

55

60


NI UK RoI


Job Gains

Job Losses

Inflationary pressures relatively subdued with output prices falling

NI Private Sector Profit Squeeze3 Month Moving Average

30

40

50

60

70

80

Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14

Output Prices Input Prices No Change

InflationD

eflation


Profits squeeze

Price of goods & services

Regional Comparisons

NI was the only UK region to see a contraction in output in December with the strongest growth rate posted in the RoI

Output / Business ActivityDecember 2014

50 = No change

49.8

55.4

61.1

40

45

50

55

60

65

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

PMI Index

ExpansionC

ontraction


Most of the UK regions & the RoI posted strong rates of growth in Q4 but NI is at the foot of regional league table

Output / Business Activity Q4 2014

50 = No change

56.5

52.4

60.6

40

45

50

55

60

65

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

PMI Index


Expansion

Contraction

The RoI reported the fastest rate of growth in business activity in 2014 with Scotland posting the slowest rate

Output / Business Activity 2014

50 = No change

57.358.2

59.7

44

47

50

53

56

59

62

65

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

PMI Index

ExpansionC

ontractionSource: Markit Economics & Ulster Bank NI PMI

NI posts the weakest rate of jobs growth within the UK in December with the RoI reporting the strongest rate

Employment LevelsDecember 2014

50 = No change

50.1

59.8

55

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


NI and the North East of England post the weakest rates of employment creation within the UK in Q4

Employment LevelsQ4 2014

50 = No change

55.5

51.2

59

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasing


Wales & the North East posted the weakest rates of jobs growth in 2014 with the RoI reporting the strongest rates

Employment Levels 2014

50 = No change

55.9

53.9

57.6

46

48

50

52

54

56

58

60

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

PMI Index

IncreasingD

ecreasingSource: Markit Economics & Ulster Bank NI PMI

Sectoral Comparisons

Slowdown in business activity across all sectors although rates of growth remain strong in services & construction

UK Business Activity / Output - PMIs

20

30

40

50

60

70

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

Services Manufacturing Construction


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 2014 Q4

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 remains robust across all sectors

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 the second half of the year relative to 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

H2PMI Index

Manufacturing Services Construction Retail ExpansionC

ontraction


All sectors have posted similar rates of output growth over the last 3 months

Northern Ireland Private Sector Output 3 month moving average

30

35

40

45

50

55

60

65

70


Manufacturing Services Construction


Expansion

Contraction

…with manufacturing & services firms reporting an easing in rates of employment growth

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 continues to report a marked slowdown in output, orders & employment

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 growth in output while the growth rates have eased markedly in the UK & NI

Manufacturing Output3 month moving average

30

35

40

45

50

55

60

65


UK NI RoI No Change


Contraction

Expansion

Slowdown in new orders growth is most marked amongst NI manufacturing firms

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

Manufacturing Output - PMI

20

30

40

50

60

70


RoI Italy Spain Greece NI France


C

ontractionExpansion

Input cost inflation picked up in December from a 5½ year low. Output prices fell for a 3rd month in a row

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 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



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 expansion / contraction threshold.

Service sector experiences a slowdown in its rates of growth in output & employment

NI Service Sector (excludes Retail)3 month moving average

30

35

40

45

50

55

60

65

70

Dec-03 Oct-05 Aug-07 Jun-09 Apr-11 Feb-13 Dec-14

Business activity New Orders Employment


Grow

th acceleratingC

ontraction accelerating

RoI firms report strong rates of growth in December. UK & NI firms have seen their rates of growth ease in recent months

Services Output (excluding Retail)3 month moving average

30

40

50

60

70


UK NI RoI No Change


Contraction

Expansion

NI firms report a marked slowdown in the rate of new orders growth in Q3 & Q4

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 saw a pick up in input cost inflation in December but it remains well below long-term average

NI Services Input & Output Inflation3 month moving average

30

40

50

60

70

80

Nov-04 Jul-06 Mar-08 Nov-09 Jul-11 Mar-13 Nov-14

No Change Input Costs Output Prices

InflationD

eflation


Profits squeeze

Service sector employment growth slowing in NI, stabilising in UK and accelerating in the RoI

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. 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



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 reporting a sharp contraction in sales in Q3 & Q4 after a bumper Q2 (boosted by Giro D’Italia)

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 recently falling at their fastest rate since 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

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


Output New Orders Employment

Source: Markit Economics, Ulster Bank

ExpansionC

ontraction

50 = No change

Input cost inflation remains high but construction firms are at least still reporting output price inflation

NI Construction Sector Profits Squeeze3 month moving average

20

30

40

50

60

70

Mar-09 Aug-10 Jan-12 Jun-13 Nov-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



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 & RoI firms with pace of growth easing significantly for NI firms

Construction Sector Output - PMI3 month moving average

20

30

40

50

60

70


PMI Index

NI UK RoI


ExpansionC

ontraction

NI orders growth continues to ease from recent record high with UK growth slowing too. RoI posts robust rates of growth

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. However, slowdown in civil engineering activity

UK Construction Activity - PMIs3 month moving average

20

30

40

50

60

70

Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14

Housing Activity Commercial Activity Civil Engineering Activity


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


Housing Activity Commercial Activity Engineering Activity

Source: Markit Economics & Ulster Bank

ExpansionC

ontraction

50 = No change

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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.

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Slide pack , Ulster Bank Northern Ireland PMI, December 2014

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Transcript of Slide pack , Ulster Bank Northern Ireland PMI, December 2014