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Slide Pack, Ulster Bank NI PMI, May 2014

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Ulster Bank Northern Ireland Purchasing Managers Index (PMI) slidepack. Includes analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector. May 2014 Survey …

Ulster Bank Northern Ireland Purchasing Managers Index (PMI) slidepack. Includes analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector. May 2014 Survey Update


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  • 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 May 2014 Survey Update  Issued 9th June 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 manufacturing & services output growth picks up in May with services output at an 8-month high Global Output - PMI 25 30 35 40 45 50 55 60 65 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Total Manufacturing Services Source: Markit Economics ExpansionContraction
  • 4. The Eurozone’s recovery loses some momentum with the ‘downturn under construction’ accelerating Eurozone PMIs: Output 25 30 35 40 45 50 55 60 65 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Composite (M&S) Manufacturing Services Construction Source: Markit Economics ExpansionContraction
  • 5. Most economies post manufacturing output growth in May PMIs: Manufacturing Output May 2014 35 40 45 50 55 60 65 70 75 S.Africa Brazil Japan Russia S.Korea China Turkey France Poland Singapore Australia Mexico India Canada Austria Vietnam Indonesia Greece Global Taiwan EZ Germany EU Spain N.Zealand* Italy Switzerland NI Ireland Netherlands US Czech Republic UK Denmark Source: Markit Economics Output Indices, *March. For the US ISM is used. UK, NI & RoI €
  • 6. The Republic of Ireland & Northern Ireland posted the fastest rates of service sector output growth in May PMIs: Services Output May 2014 35 40 45 50 55 60 65 Russia France Japan Australia India Brazil Emerging Markets China Italy EZ EU Global Spain Germany US UK NI Ireland Source: Markit Economics Output Indices €
  • 7. The French Composite PMI bucks the wider trend of continued growth amongst other economies in May Composite PMIs (Manufacturing & Services ** Excludes Construction**) 25 30 35 40 45 50 55 60 65 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Source: Markit Economics PMIs ContractionExpansion
  • 8. The US & Chinese Composite PMIs improve in May Composite PMIs (Manufacturing & Services ** Excludes Construction**) 35 40 45 50 55 60 65 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Eurozone US (ISM) China UK Source: Markit Economics PMIs, US includes construction ExpansionContraction
  • 9. The US recovery, following adverse weather conditions, continues while Japan & China remain sub-50 Manufacturing PMIs 25 30 35 40 45 50 55 60 65 May-08 May-09 May-10 May-11 May-12 May-13 May-14 US (ISM) China Japan Eurozone No Change Source: Markit Economics ContractionExpansion
  • 10. Emerging markets growth remains subdued. Russian PMI is contracting at its fastest rate since May 2009 Composite PMIs (Manufacturing & Services ** Excludes Construction**) 30 35 40 45 50 55 60 65 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Brazil Russia India Emerging Markets Source: Markit Economics ContractionExpansion
  • 11. Australia’s services & manufacturing sectors remain ‘Down Under’ the 50 threshold in May Australia - PMI 30 35 40 45 50 55 60 65 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Manufacturing Services No Change Source: Markit Economics PMIs ContractionExpansion
  • 12. The UK, NI & the RoI all see their business activity growth rates ease in May albeit rates of growth remain strong Private Sector Business Activity - PMIs 30 35 40 45 50 55 60 65 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 NI UK RoI Source: Markit & Ulster Bank NI PMI 50 = threshold between expansion / contraction ExpansionContraction **PMI Surveys Exclude Agriculture & Public Sector**
  • 13. 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 -1 0 1 2 3 4 5 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, *Average of April & May for PMI only. Q4 2013 is latest data for NICEI 50 mark is the threshold for expansion / contraction with PMI Expansion Contraction
  • 14. NI’s recovery took hold in the second half (H2) of 2013 NI Private Sector Performance (PMI) 30 35 40 45 50 55 60 2007H 1 2007H 2 2008H 1 2008H 2 2009H 1 2009H 2 2010H 1 2010H 2 2011H 1 2011H 2 2012H 1 2012H 2 2013H 1 2013H 2 PMI Index Business Activity New Orders Employment Export Orders ExpansionContraction Source: Markit Economics & Ulster Bank NI
  • 15. NI firms report record rates of growth in new business in May with job creation accelerating too NI Private Sector Activity Monthly 30 35 40 45 50 55 60 65 70 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 Business Activity New Business Employment Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  • 16. NI order books growing at a record rate in May which suggests more growth in the months ahead Private Sector New Orders 3 month moving average 30 35 40 45 50 55 60 65 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 NI UK RoI Source: Markit Economics & Ulster Bank NI OrdersincreasingOrdersContracting
  • 17. Surge in demand has led to rising backlogs of work particularly within NI and RoI Private Sector Backlogs 3 month moving average 30 35 40 45 50 55 60 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 NI UK RoI Source: Markit Economics & Ulster Bank NI PMI IncreasingDecreasing
  • 18. NI firms post their 11th successive rise in export orders & the fastest rate of growth since August 2007 NI New Export Business 20 30 40 50 60 70 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 New Export Orders No Change Source: Markit Economics & Ulster Bank NI ExpansionContraction
  • 19. PMI for Q1 signals fastest rate of jobs growth in 7 years with even stronger growth rates for Q2 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 * refers to average for April & May PMI only
  • 20. Job creation continues at a rapid rate for all economies in May Private Sector Employment Levels Monthly 30 35 40 45 50 55 60 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 NI UK RoI Source: Markit Economics & Ulster Bank NI PMI JobGainsJobLosses
  • 21. Output cost inflation remains subdued NI Private Sector Profit Squeeze 3 Month Moving Average 30 40 50 60 70 80 May-04 May-06 May-08 May-10 May-12 May-14 Output Prices Input Prices No Change InflationDeflation Source: Markit Economics & Ulster Bank NI PMI Profits squeeze Price of goods & services rising
  • 22. Regional Comparisons
  • 23. Strong growth across all UK regions & the RoI in May Output / Business Activity May 2014 50 = No change 60.6 59.559.1 40 45 50 55 60 65 70 NE SE NI Lon WM EM UK NW East SW Wal Y&H Scot RoI PMI Index ExpansionContraction Source: Markit Economics & Ulster Bank NI PMI
  • 24. …all the UK regions & the RoI post strong rates of growth over the last 3 months… Output / Business Activity 3 months to May 2014 50 = No change 58.9 59.8 59.7 40 45 50 55 60 65 70 Lon NE NI EM Wal SE East UK SW WM NW Y&H Scot RoI PMI Index Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  • 25. … and over the last 12 months Output / Business Activity 12 months to May 2014 50 = No change 57.2 57.9 59.3 40 45 50 55 60 65 Lon SE SW NW UK WM EM East Wal NI Y&H NE Scot RoI PMI Index ExpansionContraction Source: Markit Economics & Ulster Bank NI PMI
  • 26. The UK, RoI and NI all post similar rates of employment growth in May Employment Levels May 2014 50 = No change 56.4 56.3 56.5 46 48 50 52 54 56 58 60 62 NW Lon East NI SE UK Y&H EM WM SW Wal Scot NE RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  • 27. All UK regions and the RoI post strong rates of employment growth over the last 3 months Employment Levels 3 months to May 2014 50 = No change 56.1 55.7 57.1 46 48 50 52 54 56 58 60 NW Y&H NI East UK Lon SE EM SW Wal Scot NE WM RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  • 28. In 2013 NI posted its 1st annual increase in private sector employment since 2007 with that trend continuing in 2014 Employment Levels 12 Months to May 2014 50 = No change 54.6 53.1 55.7 46 48 50 52 54 56 58 NW Lon SW East UK SE WM Y&H Scot NI Wal EM NE RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  • 29. Sectoral Comparisons
  • 30. All sectors maintain strong rates of growth in May UK Business Activity / Output - PMIs 20 30 40 50 60 70 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Services Manufacturing Construction Source: Markit Economics ExpansionContraction
  • 31. UK posts strong rates of economic growth between Q2 2013 & Q1 2014 with further growth expected in Q2 UK GDP versus UK Composite PMI UK 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 1.5 GDP Q/Q GDP Q/Q PMI PMI No Change Source: ONS & Markit Economics,* average of April & May for PMI
  • 32. RoI output growth eases across all sectors in May RoI Business Activity - PMIs Monthly 20 25 30 35 40 45 50 55 60 65 70 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Manufacturing Services Construction No Change Source: Markit Economics ContractionExpansion
  • 33. All 3 broad sectors within NI saw a marked turnaround in business activity in H2 2013 NI Private Sector Business Activity (PMI) 30 35 40 45 50 55 60 65 2007H 12007H22008H 12008H 22009H12009H 22010H 12010H22011H 12011H 22012H12012H 22013H 12013H2 PMI Index Manufacturing Services Construction Retail ExpansionContraction Source: Markit Economics & Ulster Bank NI
  • 34. NI’s services and construction sectors report an acceleration in output growth in the 3 months to May Northern Ireland Private Sector Output 3 month moving average 30 35 40 45 50 55 60 65 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 Manufacturing Services Construction Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  • 35. with all sectors posting employment growth over the last 3 months NI PMI - Employment Index 3 month moving average 25 30 35 40 45 50 55 60 65 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 Manufacturing Services Construction Source: Markit Economics & Ulster Bank NI PMI JobGainsJobLosses
  • 36. NI manufacturing firms report strong rates of growth in output & orders. Employment rising at a record rate NI Manufacturing Activity 3 month moving average 25 30 35 40 45 50 55 60 65 70 May-03 Mar-05 Jan-07 Nov-08 Sep-10 Jul-12 May-14 Business activity New Orders Employment Source: Markit Economics & Ulster Bank NI PMI GrowthacceleratingContractionaccelerating
  • 37. NI manufacturing firms report an easing in output growth while the RoI & UK see growth rates accelerate Manufacturing Output 3 month moving average 30 35 40 45 50 55 60 65 May-04 May-06 May-08 May-10 May-12 May-14 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  • 38. The UK posts the strongest rates of orders growth, with NI slowing, while RoI firms post a pick-up in new orders growth Manufacturing New Orders 3 month moving average 25 30 35 40 45 50 55 60 65 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  • 39. 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 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 RoI Italy Spain Greece NI Source: Markit Economics PMIs ContractionExpansion
  • 40. NI manufacturing firms report a significant easing in inflationary pressures NI Manufacturing Input & Output Inflation 3 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 InflationDeflation Source: Markit Economics & Ulster Bank NI PMI Profits squeeze
  • 41. The PMI is signalling the fastest rate of manufacturing employment growth in Q1 & Q2 since the PMI began NI Manufacturing Employment: PMIv 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 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 firms Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction * average for April & May for PMI only
  • 42. Service sector experiences an acceleration in output, new orders & employment growth in the three months to May NI Service Sector (excludes Retail) 3 month moving average 30 35 40 45 50 55 60 65 70 May-03 Mar-05 Jan-07 Nov-08 Sep-10 Jul-12 May-14 Business activity New Orders Employment Source: Markit Economics & Ulster Bank NI GrowthacceleratingContractionaccelerating
  • 43. All 3 economies post strong rates of growth in services output in May with the RoI leading the way … Services Output (excluding Retail) 3 month moving average 30 40 50 60 70 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  • 44. … and new orders growth is accelerating in NI & RoI too Services New Orders (excluding Retail ) 3 month moving average 30 40 50 60 70 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  • 45. Service sector posts its 4th consecutive month of output price deflation (falling prices) NI Services Input & Output Inflation 3 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 InflationDeflation Source: Markit Economics & Ulster Bank NI Profits squeeze
  • 46. Service sector employment growth remains strong across all 3 economies with NI jobs growth accelerating Services Employment 3 month moving average 30 35 40 45 50 55 60 65 May-04 May-06 May-08 May-10 May-12 May-14 UK RoI NI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  • 47. In Q1 the services PMI showed its fastest rate of jobs growth since Q4 2007. Strong growth maintained in Q2 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 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 and includes the public sector Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction * average of April & May for PMI only
  • 48. NI retailers report a marked slowdown in sales but new orders remained strong in May Northern Ireland Retail PMI 3 monthly average 25 35 45 55 65 75 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 Business Activity New Orders Backlogs No Change Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  • 49. Local retailers report a pick-up in input cost inflation and an easing in output price inflation NI Retail Input & Output Inflation 3 month moving average 30 40 50 60 70 80 90 May-04 Jan-06 Sep-07 May-09 Jan-11 Sep-12 May-14 Input Costs Output Prices No Change InflationDeflation Source: Markit Economics & Ulster Bank NI Profits squeeze intensifing
  • 50. NI’s construction sector reports record rates of growth in output, new orders & employment over the last 3 months NI Construction PMI 3 month moving average 20 30 40 50 60 70 May-09 May-10 May-11 May-12 May-13 May-14 Output New Orders Employment Source: Markit Economics, Ulster Bank PMI ExpansionContraction 50 = No change
  • 51. …and output prices have been rising at a record rate NI Construction Sector Profits Squeeze 3 month moving average 20 30 40 50 60 70 May-09 May-10 May-11 May-12 May-13 May-14 PMI Index Input Prices Output Prices No Change Source: Markit Economics & Ulster Bank Inflation Deflation
  • 52. NI’s construction PMI posts its 3rd successive quarterly rise in employment in Q1 & is set for further gains in Q2 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 PMI Employment Index No Change QES Q/Q Discontinuity in QES Series Job losses Job gains **QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction * average for April & May for PMI only
  • 53. Construction output growth remains strong in all three economies. Growth in RoI & NI is accelerating in Q2 Construction Sector Output - PMI 3 month moving average 20 30 40 50 60 70 May-09 May-10 May-11 May-12 May-13 May-14 PMI Index NI UK RoI Source: Markit Economics ExpansionContraction
  • 54. NI new orders growth hits a record high in May and suggests significant work remains in the pipeline Construction Sector New Orders - PMI 3 month moving average 20 30 40 50 60 70 May-09 May-10 May-11 May-12 May-13 May-14 PMI Index NI UK RoI Source: Markit Economics ExpansionContraction
  • 55. Opportunities for NI firms within GB. House building has recently been expanding at its fastest rate in over 11 years UK Construction Activity - PMIs 3 month moving average 20 30 40 50 60 70 May-05 Nov-06 May-08 Nov-09 May-11 Nov-12 May-14 Housing Activity Commercial Activity Civil Engineering Activity Source: Markit Economics ExpansionContraction
  • 56. …with opportunities returning within the RoI too Republic of Ireland Construction Activity - PMI 3 month moving average 20 30 40 50 60 70 May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 Housing Activity Commercial Activity Engineering Activity Source: Markit Economics & Ulster Bank ExpansionContraction 50 = No change
  • 57. Slide 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.