Slide pack for the Ulster Bank NI PMI February 2014, including analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector

1. Ulster Bank Northern Ireland
Purchasing Managers Index (PMI)
Includes analysis of Global, Eurozone, UK, UK Regions, NI &
Republic of Ireland economic performance by sector
February 2014 Survey Update
Issued 10th March 2014
Richard Ramsey
Chief Economist Northern Ireland
richard.ramsey@ulsterbankcm.com
Twitter @UB_Economics

2. PMI Surveys
Purchasing 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.

3. Global output begins 2014 on a firmer footing than it
started 2013 but service sector growth eases in February
Global Output - PMI
65
Source: Markit Economics
Expansion
60
55
Contraction
50
45
40
35
30
Total
25
Feb-07
Feb-08
Feb-09
Manufacturing
Feb-10
Feb-11
Services
Feb-12
Feb-13
Feb-14

4. The Eurozone started 2013 will all sectors contracting
now only construction is waiting for a return to growth
Eurozone PMIs: Output
65
Source: Markit Economics
Expansion
60
55
50
Contraction
45
40
35
30
Composite (M&S)
Manufacturing
Services
Construction
25
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

5. Most economies post manufacturing output growth
in February with NI’s growth rate faster than most
PMIs: Manufacturing Output February 2014
Denmark
Switzerland
Czech Republi c
N.Zealand*
Poland
NI
Japan
UK
Netherlands
Germany
Taiwan
EU
EZ
Austria
Italy
Turkey
Global
Spain
India
Greece
Canada
Mexico
Ireland
Australia
Vietnam
Singapore
France
Brazil
Indonesia
S.Korea
Russia
China
S.Africa
US
35
UK, NI & RoI
€
Source: Markit Economics Output Indices,
*January. For the US ISM is used.
40
45
50
55
60
65
70

6. The UK & Republic of Ireland posted the fastest rates
of service sector output growth in February
PMIs: Services Output February 2014
UK
Ireland
Germany
NI
Australia
US*
EU
Spain
Italy
EZ
Global
Emerging Markets
China
Russia
Brazil
Japan
India
France
€
Source: Markit Economics Output Indices, *
US Non-manufacturing which is wider than
services
35
40
45
50
55
60
65

7. Germany & Italy improve in February while France
sees its rate of contraction accelerate
Composite PMIs
65
(Manufacturing & Services
** Excludes Construction**)
Expansion
60
55
50
Contraction
45
40
35
30
Source: Markit Economics PMIs
25
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

8. The US, UK & China saw their composite PMIs slip in
February with the EZ pushing higher
Composite PMIs
(Manufacturing & Services
** Excludes Construction**)
65
Eurozone
US (ISM)
China
UK
Expansion
60
55
50
Contraction
45
40
Source: Markit Economics PMIs, US includes construction
35
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

9. Japan & the Eurozone saw their growth rates slip in
February with Chinese manufacturing sub-50
Manufacturing PMIs
65
US (ISM)
China
Japan
Eurozone
No Change
60
Expansion
55
50
Contraction
45
40
35
30
Source: Markit Economics
25
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

10. Emerging markets slowdown continues but Brazil,
Russia & India post a small improvement in February…
Composite PMIs
(Manufacturing & Services
Brazil
Russia
** Excludes Construction**)
India
Emerging Markets
65
Expansion
60
55
50
Contraction
45
40
35
Source: Markit Economics
30
Feb-07 Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

11. Australia’s services sector posts its first reading
above 50 since January 2012
Australia - PMI
65
Manufacturing
Services
No Change
60
Expansion
55
50
Contraction
45
40
35
Source: Markit Economics PMIs
30
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

12. The UK, NI & RoI see growth rates ease in February
but the rates of growth still remain very strong
Private Sector Business Activity - PMIs
**PMI Surveys Exclude Agriculture & Public Sector**
65
NI
UK
RoI
Expansion
60
55
50
45
Contraction
40
35
Source: Markit & Ulster Bank NI PMI
50 = threshold between expansion / contraction
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

13. PMI suggests growth in DFP’s new private sector composite index
(combines indices for construction, services, agriculture & industrial production) in Q4 & Q1-14
NI Private Sector Output Index Versus NI PMI
PSO Q/Q%
5
4
NICEI Left Hand Scale
PMI Right Hand Scale
50 mark is the threshold for expansion / contraction with PMI
Expansion
3
2
PMI
65
60
55
1
0
50
-1
45
-2
Contraction
-3
-4
-5
-6
Source: New DFP Northern Ireland Composite Economic
Index (NICEI) & Ulster Bank / Markit Economics NI PMI, *
refers to average of Jan-14 & Feb-14 for PMI
40
35
30
2003 Q3 2005 Q1 2006 Q3 2008 Q1 2009 Q3 2011 Q1 2012 Q3 2014 Q1*

14. NI’s recovery took hold in the second half (H2) of 2013
NI Private Sector Performance (PMI)
PMI Index
60
New Orders
Employment
Export Orders
55
50
45
40
35
Source: Markit Economics & Ulster Bank NI
20
07
H
1
20
07
H
2
20
08
H
1
20
08
H
2
20
09
H
1
20
09
H
2
20
10
H
1
20
10
H
2
20
11
H
1
20
11
H
2
20
12
H
1
20
12
H
2
20
13
H
1
20
13
H
2
30
Expansion Contraction
Business Activity

15. NI firms reporting an easing in rates of growth from
multi-year / survey highs in employment, output & orders
NI Private Sector Activity
Monthly
70
Business Activity
New Business
Employment
Expansion
65
60
55
50
Contraction
45
40
35
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

16. Buoyant order books suggest more growth in the months
ahead. But pace of growth is slowing from a strong position
Private Sector New Orders
Monthly
NI
UK
Orders increasing
65
RoI
60
55
50
40
35
Source: Markit Economics & Ulster Bank NI
Orders Contracting
45
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

17. Surge in demand has led to backlogs of work
particularly within the UK & NI
Private Sector Backlogs
3 month moving average
60
UK
RoI
Increasing
NI
55
50
Decreasing
45
40
35
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

18. NI firms post their 8th successive rise in export orders
NI New Export Business
70
Expansion
New Export Orders
No Change
60
50
Contraction
40
30
Source: Markit Economics & Ulster Bank NI PMI
20
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

19. PMI underestimated QES job gains in 2012. PMI for Q3 signals fastest
rate of jobs growth since Q4 2007 with even stronger growth in Q4/Q1
PMI Index
NI Employment: PMI v QES*
Q/Q
60
1.0%
*QES is DFP's official Quarterly Employment Survey of the
number of jobs in NI & includes public sector
Job
gains
55
0.8%
0.5%
0.3%
Discontinuity in QES Series
50
0.0%
-0.3%
45
-0.5%
Job
losses
40
-1.0%
Source: DFP, Ulster Bank & Markit Economics,
PMI Index 50.0 denotes threshold between
expansion / contraction, * Jan-14 & Feb-14
average for PMI
-1.3%
35
2004 Q1
-0.8%
-1.5%
2006 Q3
2009 Q1
PMI Employment Index
No Change
2011 Q3
QES Q/Q
2014 Q1*

20. UK & RoI firms saw job creation accelerate in February
while NI firms saw an easing in the pace of jobs growth
Private Sector Employment Levels
Monthly
60
UK
RoI
Job Gains
NI
55
50
Job Losses
45
40
35
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

21. Input & output cost inflation eases in February with
output prices falling for the 1st time in 10 months
NI Private Sector Profit Squeeze
3 Month Moving Average
Output Prices
Input Prices
80
No Change
Profits
squeeze
70
Inflation
60
50
Price of goods &
services rising
Source: Markit Economics & Ulster Bank NI PMI
Deflation
40
30
Feb-04
Feb-06
Feb-08
Feb-10
Feb-12
Feb-14

22. Regional
Comparisons

23. Strong growth across all UK regions and the RoI in
February with NI mid-table in February
Output / Business Activity
February 2014
PMI Index
70
50 = No change
65
58.6
58.1
55.1
55
Expansion
60
50
Contraction
45
Source: Markit Economics & Ulster Bank NI PMI
40
WM SE Lon Wal SW UK East Y&H NI
NW NE EM Scot
RoI

24. …all the UK regions & the RoI post strong rates of
growth over the last 3 months…
Output / Business Activity
3 months to February 2014
PMI Index
70
50 = No change
65
59.0
58.3
57.2
55
Contraction
50
45
Source: Markit Economics & Ulster Bank NI PMI
40
WM SW SE East UK Lon Wal NW
Expansion
60
NI
NE Y&H EM Scot
RoI

25. … and over the last 12 months
Output / Business Activity
12 months to February 2014
PMI Index
65
60
50 = No change
57.8
54.8
55
50
Contraction
45
Source: Markit Economics & Ulster Bank NI PMI
40
Lon SE NW SW
UK Wal WM EM Y&H East Scot NI
Expansion
55.3
NE
RoI

26. All UK regions post jobs growth in February with the RoI
posting its fastest rate of job creation since June 2006
Employment Levels
February 2014
PMI Index
62
50 = No change
60
58
56
57.3
56.0
Increasing
54
53.4
52
Decreasing
50
48
Source: Markit Economics & Ulster Bank NI PMI
46
NW Lon East UK SW Y&H Scot SE
NE
NI
WM EM Wal
RoI

27. All UK regions and the RoI post jobs growth over
the last 3 months
Employment Levels
3 months to February 2014
PMI Index
60
50 = No change
58
56.1
56
55.6
54.3
Increasing
54
52
Decreasing
50
48
Source: Markit Economics & Ulster Bank NI PMI
46
SW Lon NW UK
SE East NI Y&H WM NE Scot Wal EM
RoI

28. In 2013 NI posted its 1st annual increase in private sector
employment since 2007 with trend continuing in 2014
Employment Levels
PMI Index
58
12 Months to February 2014
50 = No change
56
54.1
Increasing
54
53.3
52
51.1
Decreasing
50
48
Source: Markit Economics & Ulster Bank NI PMI
46
SW Lon WM NW East SE
UK Scot Wal NE Y&H EM
NI
RoI

29. Sectoral
Comparisons

30. All sectors post strong growth with construction recently
expanding at its fastest rate in six-and-a-half years
UK Business Activity / Output - PMIs
70
Services
Manufacturing
Construction
Expansion
60
50
Contraction
40
30
Source: Markit Economics
20
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

31. UK posts strong rates of economic growth in Q2-Q4
with further growth expected in Q1 2014
UK GDP versus UK Composite PMI
PMI Index
65
UK Composite includes Construction
GDP Q/Q
1.5
60
1
55
0.5
50
0
45
-0.5
40
-1
35
-1.5
30
Source: ONS & Markit Economics, * for PMI average of
January & February
25
-2
-2.5
2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1*
GDP Q/Q
PMI
PMI No Change

32. RoI output growth eases across all sectors in February,
but services and construction remain at healthy levels
RoI Business Activity - PMIs
Monthly
70
Services
Construction
No Change
65
60
Expansion
Manufacturing
55
Contraction
50
45
40
35
30
25
Source: Markit Economics
20
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

33. All 3 broad sectors within NI saw a marked
turnaround in business activity in H2 2013
PMI Index
NI Private Sector Business Activity (PMI)
65
Manufacturing
Services
Construction
Retail
Expansion
60
55
50
Contraction
45
40
35
Source: Markit Economics & Ulster Bank NI
20
07
H
20 1
07
H
20 2
08
H
20 1
08
H
20 2
09
H
20 1
09
H
20 2
10
H
20 1
10
H
20 2
11
H
20 1
11
H
20 2
12
H1
20
12
H
20 2
13
H
20 1
13
H2
30

34. All 3 broad sectors within NI continue to report
robust rates of output growth in early-2014
Northern Ireland Private Sector Output
3 month moving average
65
Manufacturing
Services
Construction
Expansion
60
55
50
Contraction
45
40
35
Source: Markit Economics &
Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

35. …with all sectors also reporting employment growth over
the last 3 months with manufacturing at a record rate
NI PMI - Employment Index
3 month moving average
65
Manufacturing
Services
Construction
Job Gains
60
55
50
Job Losses
45
40
35
30
Source: Markit Economics &
Ulster Bank NI PMI
25
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

36. NI manufacturers continue to report strong rates of growth
in orders, employment & output over the last 3 months
NI Manufacturing Activity - PMI
65
3 month moving average
Business activity
New Orders
Employment
Growth
60
55
Contraction
50
45
40
35
30
Source: Markit Economics & Ulster Bank NI
25
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

37. UK & NI manufacturing firms continue to post strong
rates of growth in output during the last 3 months
Manufacturing Output
3 month moving average
65
UK
NI
RoI
No Change
Expansion
60
55
50
Contraction
45
40
35
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Feb-06
Feb-08
Feb-10
Feb-12
Feb-14

38. The UK posts the strongest rate of growth in new orders
Manufacturing New Orders
3 month moving average
65
UK
NI
RoI
No Change
Expansion
60
55
50
Contraction
45
40
35
30
Source: Markit Economics & Ulster Bank NI PMI
25
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

39. NI has been outperforming its European competitors
Manufacturing Output - PMI
70
RoI
Italy
Spain
Greece
NI
Expansion
60
50
Contraction
40
30
Source: Markit Economics PMIs
20
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

40. NI manufacturers post the slowest rate of input cost
inflation in February in 20 months
NI Manufacturing Input & Output Inflation
3 month moving average
No Change
Input Costs
Output Prices
80
Profits
squeeze
70
Inflation
60
50
Deflation
40
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

41. PMI underestimated jobs surge in Q2. Following further job
creation in Q3, PMI suggests more of the same in Q4/Q1
PMI Index
65
NI Manufacturing Employment: PMI v QES*
Q/Q
4%
*QES is DFP's official Quarterly Employment
Survey of the number of jobs in NI firms
60
Job
gains
Discontinuity in
QES Series
3%
2%
55
1%
50
0%
45
-1%
Job
losses
40
35
-3%
Source: DFP, Ulster Bank & Markit Economics,
PMI Index 50.0 denotes threshold between
expansion / contraction, * Jan-14 & Feb-14
average for PMI
-4%
-5%
30
2004 Q1
-2%
2006 Q3
2009 Q1
PMI Employment Index
2011 Q3
No Change
QES Q/Q
2014 Q1*

42. Service sector recovery well underway with new orders
growth easing from its recent record high in January
NI Service Sector (excludes Retail)
3 month moving average
Business activity
New Orders
Growth accelerating
70
Employment
65
60
55
Contraction accelerating
50
45
40
35
Source: Markit Economics & Ulster Bank NI
30
Feb-03
Dec-04
Oct-06
Aug-08
Jun-10
Apr-12
Feb-14

43. All 3 economies post strong rates of growth in services
output in February with RoI leading the way …
Services Output (excluding Retail)
3 month moving average
70
UK
NI
RoI
No Change
65
Expansion
60
55
50
Contraction
45
40
35
30
Source: Markit Economics & Ulster Bank NI PMI
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

44. … and new orders growth easing from recent highs
Services New Orders (excluding Retail )
3 month moving average
70
UK
NI
RoI
No Change
Expansion
60
Contraction
50
40
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

45. Both input cost and output price inflation ease within
service sector firms in February
NI Services Input & Output Inflation
3 month moving average
No Change
Input Costs
Output Prices
80
Profits
squeeze
70
Inflation
60
50
Deflation
40
Source: Markit Economics & Ulster Bank NI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

46. Service sector employment growth accelerates within
in the UK, RoI & NI over the last 3 months to February
Services Employment
3 month moving average
65
UK
RoI
NI
No Change
Expansion
60
55
50
Contraction
45
40
35
Source: Markit Economics & Ulster Bank NI PMI
30
Feb-04
Feb-06
Feb-08
Feb-10
Feb-12
Feb-14

47. In Q4 the services PMI showed its fastest rate of jobs
growth since Q4 2007 but growth has eased in Q1 2014
PMI Index
65
NI Services Employment: PMI v QES*
Q/Q
1.5%
*QES is DFP's official Quarterly Employment Survey of the number of
jobs in NI and includes the public sector
1.0%
60
Job
gains
Discontinuity in QES Series
55
0.5%
50
0.0%
45
-0.5%
Source: DFP, Ulster Bank & Markit Economics,
PMI Index 50.0 denotes threshold between
expansion / contraction, * Jan-14 & Feb-14
average for PMI
Job losses
-1.0%
40
2004 Q1
2006 Q3
2009 Q1
PMI Employment Index
2011 Q3
No Change
QES Q/Q
2014 Q1*

48. NI retailers report an acceleration in sales and new
orders in February
Northern Ireland Retail PMI
3 monthly average
75
Business Activity
New Orders
Backlogs
No Change
Expansion
65
55
Contraction
45
35
Source: Markit Economics & Ulster Bank NI PMI
25
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

49. Local retailers maintain pricing power in February
NI Retail Input & Output Inflation
3 month moving average
90
Input Costs
Output Prices
No Change
80
Profits squeeze
70
Inflation
60
50
Deflation
40
Source: Markit Economics & Ulster Bank NI
30
Feb-04
Oct-05
Jun-07
Feb-09
Oct-10
Jun-12
Feb-14

50. NI construction sector continues to report growth in
output, new orders & employment over the last 3 months
NI Construction PMI
3 month moving average
Output
New Orders
Employment
Expansion
60
50 = No change
50
Contraction
40
30
Source: Markit Economics, Ulster Bank PMI
20
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

51. …and output prices have been rising at a record rate
NI Construction Sector Profits Squeeze
3 month moving average
PMI Index
Input Prices
Output Prices
No Change
70
Inflation
60
50
Deflation
40
30
Source: Markit Economics & Ulster Bank
20
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

52. NI’s construction PMI posted its 1st quarter of jobs growth
in Q3 2013 since Q4 2007 with further growth in Q4/Q1
PMI Index
NI Construction Employment: PMI v QES*
Q/Q
5.0%
65
**QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms
60
55
Discontinuity in QES Series
Job
gains
2.5%
0.0%
50
45
-2.5%
40
-5.0%
35
30
25
Job losses
Source: DFP, Ulster Bank & Markit Economics,
PMI Index 50.0 denotes threshold between
expansion / contraction, * Jan-14 & Feb-14
average for PMI
-7.5%
-10.0%
20
2004 Q1
2006 Q3
PMI Employment Index
2009 Q1
2011 Q3
No Change
2014 Q1*
QES Q/Q

53. Construction output growth remains strong particularly
within the UK
Construction Sector Output - PMI
3 month moving average
PMI Index
70
UK
RoI
Expansion
NI
60
50
Contraction
40
30
Source: Markit Economics
20
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

54. New orders growth suggests significant work
remains in the pipeline
Construction Sector New Orders - PMI
3 month moving average
PMI Index
70
NI
UK
RoI
Expansion
60
50
Contraction
40
30
Source: Markit Economics
20
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

55. Opportunities for NI firms within GB market. House
building is expanding at its fastest rate in over 11 years
UK Construction Activity - PMIs
3 month moving average
70
Housing Activity
Commercial Activity
Civil Engineering Activity
Expansion
60
Contraction
50
40
30
Source: Markit Economics
20
Feb-05
Aug-06
Feb-08
Aug-09
Feb-11
Aug-12
Feb-14

56. …with opportunities returning within the RoI too
Republic of Ireland Construction Activity - PMI
3 month moving average
70
Housing Activity
Commercial Activity
Engineering Activity
Expansion
60
50 = No change
50
Contraction
40
30
Source: Markit Economics & Ulster Bank
20
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Feb-13
Feb-14

57. 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) derivatives 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.
Slide 57