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Ulster Bank NI PMI - October 2013
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Ulster Bank NI PMI - October 2013

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Slide pack for the latest Ulster Bank Northern Ireland PMI report, October 2013, including analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector

Slide pack for the latest Ulster Bank Northern Ireland PMI report, October 2013, including analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector

Published in: Economy & Finance, Business

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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 October 2013 Survey Update  Issued 11th November 2013 Richard Ramsey Chief Economist Northern Ireland richard.ramsey@ulsterbankcm.com
  • 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 growth accelerates in October due to the services sector with manufacturing slowing… Global Output - PMI 65 Source: Markit Economics Expansion 60 55 50 Contraction 45 40 35 30 Total 25 May-07 Apr-08 Mar-09 Manufacturing Feb-10 Jan-11 Services Dec-11 Nov-12 Oct-13
  • 4. … but the Eurozone experiences the opposite trend with service sector output slowing & manufacturing picking up Eurozone PMIs: Output 65 Expansion Source: Markit Economics Output Indices 60 55 50 Contraction 45 40 35 30 Composite (M&S) Manufacturing Services Construction 25 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
  • 5. Top performers within manufacturing incl. US, NI & UK. Underperformers incl. Mexico, France, Greece & India PMIs: Manufacturing Output October 2013 US NI UK Japan Switzerland Czech Republic Ireland Denmark Canada N.Zealand* Poland Austria Russia Netherlands Australia Taiwan EU Italy Germany Global EZ Turkey S.Africa Singapore Israel* Indonesia Spain Brazil Vietnam China S.Korea Mexico France India Greece 35 NI, UK & RoI € Source: Markit Economics Output Indices, *Sep, for the US ISM is used. 40 45 50 55 60 65 70
  • 6. The UK, Ireland & the US post the fastest rate of service sector output growth in October PMIs: Services Output October 2013 UK Ireland US* Global NI Japan EU Germany China Russia Brazil Emerging Markets EZ France Italy Spain Australia India € Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services 35 40 45 50 55 60 65
  • 7. All 4 of the largest economies within the eurozone are now expanding but UK & RoI are outperforming them Composite PMIs 65 (Manufacturing & Services ** Excludes Construction**) Expansion 60 55 50 Contraction 45 40 35 Source: Markit Economics PMIs 30 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 8. The UK, US & China all saw an acceleration in growth in October while the rate of growth eased in the Eurozone 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 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 9. The US, Japan, EZ & China all posted an acceleration in manufacturing activity in October Manufacturing PMIs 65 US (ISM) China Japan Eurozone 60 Expansion 55 50 Contraction 45 40 35 30 Source: Markit Economics 25 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 10. Russia & Brazil post an acceleration in output but pace of contraction continues in India Composite PMIs (Manufacturing & Services Brazil Russia India ** Excludes Construction**) Emerging Markets No Change 65 Expansion 60 55 50 Contraction 45 40 35 Source: Markit Economics 30 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 11. … with Australia’s service sector still contracting though manufacturing sector continues to improve Australia - PMI 65 Manufacturing Services No Change 60 Expansion 55 50 Contraction 45 40 35 Source: Markit Economics PMIs 30 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 12. NI, UK & the RoI all post strong rates of growth in October 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 13. PMI suggests growth in DFP’s new private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q2, Q3 & Q4 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, * for PMI refers to October 40 35 30 2003 Q2 2004 Q4 2006 Q2 2007 Q4 2009 Q2 2010 Q4 2012 Q2 2013 Q4*
  • 14. NI firms report an increase in business activity, new orders & employment in October 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 15. Forward looking indicators suggest more growth in all three economies in the months ahead Private Sector New Orders Monthly NI UK Orders increasing 65 RoI 60 55 50 Orders Contracting 45 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13
  • 16. Surge in demand is leading to backlogs of work 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 Oct-03 Jun-05 Feb-07 Oct-08 Jun-10 Feb-12 Oct-13
  • 17. NI firms post their 4th successive increase in export orders in October NI New Export Business 70 Expansion New Export Orders No Change 60 50 Contraction 40 30 Source: Markit Economics & Ulster Bank NI PMI 20 Oct-03 Oct-05 Oct-07 Oct-09 Oct-11 Oct-13
  • 18. PMI underestimated job gains in 2012 (relative to official jobs survey). PMI for Q3 signals fastest rate of jobs growth since Q4 2007 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, * for PMI refers to October only -1.3% 35 2003 Q4 -0.8% -1.5% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 QES Q/Q 2013 Q4*
  • 19. Firms within the UK, RoI & NI all experienced a faster rate of jobs growth in October 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 20. Private sector’s profitability squeeze remains but pricing power is on the rise NI Private Sector Profit Squeeze 3 Month Moving Average Output Prices Input Prices No Change 80 Profits squeeze 70 Inflation 60 50 30 Price of goods & services rising Source: Markit Economics & Ulster Bank NI PMI Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13 Deflation 40
  • 21. Regional Comparisons
  • 22. PMIs experience an Indian summer in October with strong growth reported everywhere… Output / Business Activity October 2013 PMI Index 70 50 = No change 65 61.5 60 58.8 Expansion 57.6 55 50 Contraction 45 Source: Markit Economics & Ulster Bank NI PMI 40 Lon EM SE SW NW UK East Wal Y&H WM Scot NI NE RoI
  • 23. …all the UK regions post growth over the last 3 months Output / Business Activity 3 months to October 2013 PMI Index 50 = No change 65 60.8 58.2 57.2 55 Contraction 50 Expansion 60 45 Source: Markit Economics & Ulster Bank NI PMI 40 Lon NW SE EM SW UK East Y&H Wal WM NI Scot NE RoI
  • 24. … and NI is the last UK region to finally post a rise in output over the last 12 months Output / Business Activity PMI Index 12 months to October 2013 50 = No change 60 54.9 53.6 50.9 Contraction 50 Source: Markit Economics & Ulster Bank NI PMI 45 Lon Wal NW Y&H SE UK EM Scot SW East WM NE Expansion 55 NI RoI
  • 25. All the UK regions and the Republic of Ireland post employment growth in October … Employment Levels October 2013 PMI Index 50 = No change 60 58 56 55.7 55.5 Increasing 54 53.1 52 Decreasing 50 48 Source: Markit Economics & Ulster Bank NI PMI 46 Lon SE SW WM UK East Wal NW Scot NI Y&H NE EM RoI
  • 26. … and over the last 3 months to October Employment Levels PMI Index 58 3 months to October 2013 50 = No change 56 54.7 Increasing 54 53.3 52.1 52 Decreasing 50 48 46 Source: Markit Economics & Ulster Bank NI PMI 44 WM NW SW Lon East Scot SE UK Wal NI Y&H EM NE RoI
  • 27. NI posts a marginal decline in employment & RoI the sharpest rise over the last 12 months Employment Levels PMI Index 12 months to October 2013 50 = No change 54 53.0 Increasing 52 51.6 50 Decreasing 49.6 48 Source: Markit Economics & Ulster Bank NI PMI 46 WM SE East SW Lon Scot Wal UK NW EM Y&H NE NI RoI
  • 28. Sectoral Comparisons
  • 29. All three broad UK sectors maintain strong rates of growth in October with services growth at a 16-year high UK Business Activity / Output - PMIs 70 Services Manufacturing Construction Expansion 60 50 Contraction 40 30 Source: Markit Economics 20 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 30. UK economic growth accelerates in Q2, Q3 & Q4 PMI Index 65 UK GDP versus UK Composite PMI UK Composite includes Construction Source: ONS & Markit Economics, * refers October 2013 PMI only GDP Q/Q 1.5 60 1 55 0.5 50 0 45 -0.5 40 -1 35 -1.5 30 -2 25 -2.5 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4* GDP Q/Q PMI PMI No Change
  • 31. All three sectors of the RoI economy post an acceleration in their growth rates in October RoI Business Activity - PMIs Monthly 65 Services Construction No Change 60 55 Expansion Manufacturing 50 Contraction 45 40 35 30 25 Source: Markit Economics 20 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 32. All three broad sectors in NI reported increased levels of business activity over the last 3 months 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 33. …with all sectors also reporting job gains over the last 3 months 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 34. NI’s manufacturing sector posts an acceleration in employment & output growth over the last 3 months NI Manufacturing Activity 3 month moving average Business activity New Orders Employment 60 55 50 Contraction accelerating 45 40 35 30 Source: Markit Economics & Ulster Bank NI PMI 25 Oct-04 Apr-06 Oct-07 Growth accelerating 65 Apr-09 Oct-10 Apr-12 Oct-13
  • 35. The UK, RoI and NI all witness an acceleration in manufacturing output during the last 3 months Manufacturing Output 3 month moving average 65 UK NI RoI No Change Expansion 60 55 50 45 Contraction 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 36. The UK posts the strongest 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 37. N.Ireland is outperforming its European competitors Manufacturing Output - PMI 70 RoI Italy Spain Greece NI Expansion 60 50 Contraction 40 30 Source: Markit Economics PMIs 20 May-07 Apr-08 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 38. Cost price inflation remains for local manufacturing firms but pricing power is improving with increased demand 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 39. PMI underestimated manufacturing job surge in Q2. PMI suggests further job gains in Q3 & Q4 2013 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, * for PMI refers to October only -4% -5% 30 2003 Q4 -2% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 2011 Q4 No Change 2013 Q4* QES Q/Q
  • 40. 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 Business activity 65 New Orders Growth accelerating 70 Employment 60 55 Contraction accelerating 50 45 40 35 Source: Markit Economics & Ulster Bank NI 30 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 41. All three economies post an acceleration in services output growth in the 3 months to October… Services Output (excluding Retail) 3 month moving average 70 UK NI RoI No Change 65 Expansion 60 55 50 Contraction 45 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 42. … and strong new orders growth too Services New Orders (excluding Retail ) 3 month moving average 70 UK NI RoI No Change Expansion 60 50 Contraction 40 Source: Markit Economics & Ulster Bank NI PMI 30 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 43. Output prices within service sector firms rise at their fastest rate in October in over 5 years 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 44. …with employment growth accelerating in the UK & NI whilst remaining strong in the RoI 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 45. In Q3 the services PMI finally shows quarterly employment growth for the first time since Q1 2008 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% -0.5% 45 Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction, * for PMI refers to October only Job losses -1.0% 40 2003 Q4 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 QES Q/Q 2013 Q4*
  • 46. Retailers summer boom extends into October 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 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 47. Local retailers maintain pricing power in October NI Retail Input & Output Inflation 3 month moving average 90 Input Costs Output Prices No Change 80 Profits squeeze Inflation 70 60 50 Deflation 40 Source: Markit Economics & Ulster Bank NI 30 Oct-04 Apr-06 Oct-07 Apr-09 Oct-10 Apr-12 Oct-13
  • 48. NI construction sector reports growth in output & employment over the last 3 months but dip in new orders 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 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 49. …but output prices have stopped falling 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 PMI 20 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 50. NI’s construction PMI posted its first quarter of employment growth in Q3 2013 since Q4 2007 PMI Index NI Construction Employment: PMI v QES** 65 Q/Q 5.0% **QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms 60 Job gains 55 Discontinuity in QES Series 50 2.5% 0.0% 45 -2.5% 40 35 30 25 -5.0% Job losses Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction, * for PMI refers to October only -7.5% 20 2003 Q4 -10.0% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 2013 Q4* QES Q/Q
  • 51. Construction output accelerates in the UK, RoI and NI over the last 3 months Construction Sector Output - PMI 3 month moving average PMI Index NI UK RoI Expansion 60 50 Contraction 40 30 Source: Markit Economics 20 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 52. New orders growth accelerating in the UK & RoI but dips in NI Construction Sector New Orders - PMI 3 month moving average PMI Index UK RoI Expansion NI 60 50 Contraction 40 30 Source: Markit Economics 20 Mar-09 Feb-10 Jan-11 Dec-11 Nov-12 Oct-13
  • 53. Opportunities for NI firms within GB market. House building sector expanding at its fastest rate in almost 10 years… UK Construction Activity - PMIs 3 month moving average 70 Housing Activity Commercial Activity Civil Engineering Activity Expansion 60 50 Contraction 40 30 Source: Markit Economics 20 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
  • 54. …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 Dec-07 Oct-08 Aug-09 Jun-10 Apr-11 Feb-12 Dec-12 Oct-13
  • 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. Slide 55

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