Ulster Bank NI PMI Slide pack September 2013

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Slide pack for the Ulster Bank Northern Ireland PMI, September 2013, including comparisons between sectors and between NI, RoI, UK and global economics

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Ulster Bank NI PMI Slide pack September 2013

  1. 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 September 2013 Survey Update  Issued 14th October 2013 Richard Ramsey Chief Economist Northern Ireland richard.ramsey@ulsterbankcm.com
  2. 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. 3. Global output growth slows in September due to the services sector… Global Output - PMI 65 Source: Markit Economics Expansion 60 55 50 Contraction 45 40 35 30 Total 25 Apr-07 Mar-08 Feb-09 Manufacturing Jan-10 Dec-10 Services Nov-11 Oct-12 Sep-13
  4. 4. … but the Eurozone experiences an acceleration in service sector activity with manufacturing growth slowing 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 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
  5. 5. Top performers within manufacturing incl. US, UK & NI. Underperformers incl. France, S.Africa, Greece & India PMIs: Manufacturing Output September 2013 US UK NI Netherlands Switzerland N.Zealand* Czech Republic Poland Turkey Ireland Austria Japan EU Canada Global Italy Taiwan Germany EZ Singapore Spain Denmark Israel* Russia Brazil Indonesia China Mexico Australia Vietnam S.Korea India France Greece S.Africa 35 UK, NI & RoI € Source: Markit Economics Output Indices, *Aug, for the US ISM is used. 40 45 50 55 60 65 70
  6. 6. The UK, NI & Ireland post the fastest rate of service sector output growth in September PMIs: Services Output September 2013 UK Ireland NI US* EU Germany Global Japan Italy China EZ Russia France Emerging Markets Brazil Spain Australia India € Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services 35 40 45 50 55 60 65
  7. 7. Three of the four largest economies within the eurozone are now expanding Composite PMIs 65 (Manufacturing & Services ** Excludes Construction**) Expansion 60 55 50 Contraction 45 40 35 Source: Markit Economics PMIs 30 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  8. 8. Deceleration in the growth rates of China, UK, & the US with the rate of growth picking up 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 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  9. 9. The US & Japan posted an acceleration in manufacturing activity in September Manufacturing PMIs 65 US (ISM) China Japan Eurozone 60 Expansion 55 50 Contraction 45 40 35 30 Source: Markit Economics 25 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  10. 10. Russia & Brazil post expansion but pace of contraction accelerates in India Composite PMIs (Manufacturing & Services ** Excludes Construction**) Brazil Russia India Emerging Markets No Change 65 60 Expansion 55 50 Contraction 45 40 35 Source: Markit Economics 30 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  11. 11. … with Australia’s service sector still contracting though manufacturing returned to growth Australia - PMI 65 Manufacturing Services No Change 60 Expansion 55 50 Contraction 45 40 35 Source: Markit Economics PMIs 30 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  12. 12. NI, UK & the RoI all post strong rates of growth in September 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  13. 13. 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 PSO Q/Q% 5 4 NICEI Left Hand Scale PMI Right Hand Scale PMI 50 mark is the threshold for expansion / contraction with PMI 65 60 3 Expansion 2 55 1 0 50 -1 45 -2 Contraction -3 -4 -5 Source: New DFP Northern Ireland Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI -6 2003 Q1 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3 40 35 30
  14. 14. NI firms report an increase in business activity, new orders & employment in September 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  15. 15. Forward looking indicators suggest more growth in all three economies in the months ahead Private Sector New Orders 3 month moving average NI UK Orders increasing 65 RoI 60 55 50 Orders Contracting 45 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 Sep-13
  16. 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 Sep-03 May-05 Jan-07 Sep-08 May-10 Jan-12 Sep-13
  17. 17. NI firms post their 3rd successive increase in export orders in September NI New Export Business Growth Accelerating Monthly 65 New Export Orders 60 No Change 55 50 Contraction Accelerating 45 40 35 30 25 Source: Markit Economics & Ulster Bank 20 Sep-03 Sep-05 Sep-07 Sep-09 Sep-11 Sep-13
  18. 18. 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* PMI Index 60 Q/Q *QES is DFP's official Quarterly Employment Survey of the number of jobs in NI & includes the public sector Job gains 55 1.0% 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,PMI 3mth averages -1.3% -1.5% 35 Sep-03 -0.8% Dec-04 Mar-06 Jun-07 PMI Employment Index Sep-08 Dec-09 No Change Mar-11 Jun-12 QES Q/Q Sep-13
  19. 19. Firms within the UK, RoI & NI all experience job gains in September but the pace of growth eases for NI Private Sector Employment Levels Monthly 60 UK RoI 55 Job Gains NI 50 Job Losses 45 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
  20. 20. Private sector’s profitability squeeze remains NI Private Sector Profit Squeeze 3 Month Moving Average Output Prices Input Prices No Change 80 Profits squeeze 70 Inflation 60 50 Deflation 40 Source: Markit Economics & Ulster Bank NI Price of goods & services falling 30 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  21. 21. Regional Comparisons
  22. 22. PMIs experience an Indian summer in September with strong growth reported everywhere… Output / Business Activity September 2013 PMI index 65 50 = No change 60.4 60 58.7 55 Expansion 55.7 50 Contraction 45 Source: Markit Economics & Ulster Bank NI PMI 40 Lon NW EM SE SW UK Y&H Wal NI East Scot WM NE RoI
  23. 23. … all the UK regions post growth over the last 3 months Output / Business Activity Q3 2013 PMI Index 50 = No change 65 60.2 57.7 56.0 55 Contraction 50 Expansion 60 45 Source: Markit Economics & Ulster Bank NI PMI 40 NW Lon SE SW UK EM East Y&H WM Wal Scot NI NE RoI
  24. 24. …but NI is the only UK region to post a decline in output over the last 12 months Output / Business Activity PMI index 12 months to September 2013 50 = No change 60 53.2 Contraction 50 49.5 45 Source: Markit Economics & Ulster Bank NI PMI 40 Wal Lon NW Y&H SE UK Scot EM East SW WM NE NI Expansion 53.9 55 RoI
  25. 25. All the UK regions and the Republic of Ireland post employment growth in September … Employment Levels September 2013 PMI Index 50 = No change 58 56 54.8 Increasing 54 53.6 52 51.4 50 Decreasing 48 46 Source: Markit Economics & Ulster Bank NI PMI 44 WM NW Lon SW UK SE Scot Wal East Y&H NI EM NE RoI
  26. 26. … and over the last 3 months to September Employment Levels PMI Index 58 Q3 2013 50 = No change 56 54.5 Increasing 54 52.3 52 51.4 Decreasing 50 48 46 Source: Markit Economics & Ulster Bank NI PMI 44 WM NW SW East Scot Lon UK Wal SE NE EM NI Y&H RoI
  27. 27. NI posts the steepest decline in employment & RoI the sharpest rise over the last 12 months Employment Levels PMI Index 12 months to September 2013 50 = No change 54 52 51.1 Increasing 52.6 50 Decreasing 48.9 48 46 44 Source: Markit Economics & Ulster Bank NI PMI 42 WM SE East Scot SW EM Wal UK Lon NW Y&H NE NI RoI
  28. 28. Sectoral Comparisons
  29. 29. All three broad UK sectors maintain strong rates of growth in September UK Business Activity / Output - PMIs 70 Services Manufacturing Construction Expansion 60 50 Contraction 40 30 Source: Markit Economics 20 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  30. 30. UK economic growth accelerates in Q2 & Q3 PMI Index 65 UK GDP versus UK Composite PMI UK Composite includes Construction Source: ONS & Markit Economics, * refers to July & August 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 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 GDP Q/Q PMI PMI No Change
  31. 31. All three sectors of the RoI economy post growth (>50) for the first time since May 2007 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 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  32. 32. All three broad sectors in NI reported increased levels of business activity in Q3… NI Private Sector Output 65 3 month moving average Manufacturing Services Construction Expansion 60 55 50 Contraction 45 40 35 Source: Markit Economics & Ulster Bank NI PMI 30 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  33. 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 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
  34. 34. NI’s manufacturing sector posts an acceleration in jobs growth, output & new orders 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 Sep-04 Mar-06 Sep-07 Growth accelerating 65 Mar-09 Sep-10 Mar-12 Sep-13
  35. 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  36. 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  37. 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 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13
  38. 38. Cost price inflation remains for local manufacturing firms but pricing power is improving too 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  39. 39. PMI underestimated manufacturing job surge in Q2. PMI suggests further job gains in Q3 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 -2% -3% 35 Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction -4% -5% 30 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 PMI Employment Index No Change Jun-12 Sep-13 QES Q/Q
  40. 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  41. 41. All three economies post an acceleration in output growth in Q3 2013… Services Output 3 month moving average 70 UK NI RoI No Change 65 Expansion 60 55 50 45 Contraction 40 35 Source: Markit Economics & Ulster Bank NI 30 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  42. 42. … and strong new orders growth in the same three economies 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  43. 43. Pricing power remains very weak amongst NI’s services sector whilst inflationary pressures remain 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  44. 44. …with employment growth accelerating in the RoI and NI in Q3 2013 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  45. 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% 45 -0.5% Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction Job losses -1.0% 40 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 PMI Employment Index Dec-09 Mar-11 No Change Jun-12 QES Q/Q Sep-13
  46. 46. Retailers summer boom extends into September 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 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  47. 47. Profits squeeze on local retailers eases significantly due to increased pricing power NI Retail Input & Output Inflation 3 month moving average 90 Input Costs Output Prices No Change Profits squeeze narrowing 80 Inflation 70 60 50 Deflation 40 Source: Markit Economics & Ulster Bank NI 30 Sep-04 Mar-06 Sep-07 Mar-09 Sep-10 Mar-12 Sep-13
  48. 48. NI construction sector reports growth in output, new orders and 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 Mar-09 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13
  49. 49. …but the profits squeeze continues 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 Mar-09 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13
  50. 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 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 Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction Job losses -7.5% -10.0% 20 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Sep-13 PMI Employment Index No Change QES Q/Q
  51. 51. UK (58.9), NI (56.2) & RoI (55.7) construction sectors all post healthy rates of growth in September 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 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13
  52. 52. New orders rising in all three economies 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 Dec-09 Sep-10 Jun-11 Mar-12 Dec-12 Sep-13
  53. 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 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13
  54. 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 Mar-07 Apr-08 May-09 Jun-10 Jul-11 Aug-12 Sep-13
  55. 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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