Ulster Bank PMI Slide Pack

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Slides illustrating data from the Ulster Bank Northern Ireland PMI for August 2013, including analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector

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Ulster Bank PMI Slide Pack

  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 August 2013 Survey Update  Issued 9th September 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 accelerates in August… Global Output - PMI 25 30 35 40 45 50 55 60 65 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Total Manufacturing Services Source: Markit Economics ExpansionContraction
  4. 4. … with both manufacturing & services sectors posting growth in the Eurozone Eurozone PMIs: Output 25 30 35 40 45 50 55 60 65 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Composite (M&S) Manufacturing Services Construction Source: Markit Economics Output Indices ExpansionContraction
  5. 5. Top performers within manufacturing incl. US, Denmark, UK & NI. Underperformers incl. BRICs /Asia, Greece & Australia PMIs: Manufacturing Output August 2013 35 40 45 50 55 60 65 70 S.Korea Australia India Indonesia France Greece Vietnam Taiwan Brazil Singapore Russia China Mexico Turkey Canada Spain Israel* Ireland Global Switzerland EZ Japan Austria Italy EU Germany Netherlands Czech Poland NI S.Africa N.Zealand* UK US Denmark Source: Markit Economics Output Indices, *July, for the US ISM is used. UK, NI & RoI €
  6. 6. The US, UK & Ireland post the fastest rate of service sector output growth in August € PMIs: Services Output August 2013 35 40 45 50 55 60 65 Australia India Italy France Brazil Spain EZ Emerging Markets Japan Russia Germany China EU Global NI UK Ireland US* Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services €
  7. 7. Three of the four largest economies within the eurozone are now expanding Composite PMIs (Manufacturing & Services ** Excludes Construction**) 30 35 40 45 50 55 60 65 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Source: Markit Economics PMIs ContractionExpansion
  8. 8. Acceleration in growth for the US, UK, China & the Eurozone Composite PMIs (Manufacturing & Services ** Excludes Construction**) 35 40 45 50 55 60 65 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Eurozone US (ISM) China UK Source: Markit Economics PMIs, US includes construction ExpansionContraction
  9. 9. All major economies posting an improvement in August Manufacturing PMIs 25 30 35 40 45 50 55 60 65 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 US (ISM) China Japan Eurozone Source: Markit Economics Contraction Expansion
  10. 10. But outside of China, Russia is the only one of the BRIC economies in expansion mode (> 50.0) Composite PMIs (Manufacturing & Services ** Excludes Construction**) 30 35 40 45 50 55 60 65 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Brazil Russia India Emerging Markets No Change Source: Markit Economics ContractionExpansion
  11. 11. … with a strong Aussie $ and a slowdown in Asia is pushing Australia ‘Down Under’ too Australia - PMI 30 35 40 45 50 55 60 65 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Manufacturing Services No Change Source: Markit Economics PMIs ContractionExpansion
  12. 12. NI, UK & the RoI all post strong rates of growth in August. NI firms record their fastest rate of growth since March 2007 Private Sector Business Activity - PMIs 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 NI UK RoI Source: Markit & Ulster Bank NI PMI 50 = threshold between expansion / contraction ExpansionContraction **PMI Surveys Exclude Agriculture & Public Sector**
  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 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 2003 Q1 2004 Q3 2006 Q1 2007 Q3 2009 Q1 2010 Q3 2012 Q1 2013 Q3* PSO Q/Q% 30 35 40 45 50 55 60 65 PMI NICEI Left Hand Scale PMI Right Hand Scale Source: New DFP Northern Ireland Composite Economic Index (NICEI) & Ulster Bank / Markit Economics NI PMI , * average for June & July 50 mark is the threshold for expansion / contraction with PMI Expansion Contraction E i
  14. 14. NI firms report an increase in business activity, new orders & employment over the last 3 months NI Private Sector Activity 3 month moving average 30 35 40 45 50 55 60 65 70 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Business Activity New Business Employment Source: Markit Economics & Ulster Bank NI ExpansionContraction
  15. 15. Forward looking indicators suggest more growth in all three economies in the months ahead Private Sector New Orders 3 month moving average 30 35 40 45 50 55 60 65 Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13 NI UK RoI Source: Markit Economics & Ulster Bank NI PMI OrdersincreasingOrdersContracting
  16. 16. Surge in demand is leading to backlogs of work in NI & the UK Private Sector Backlogs 3 month moving average 30 35 40 45 50 55 60 Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13 NI UK RoI Source: Markit Economics & Ulster Bank NI PMI IncreasingDecreasing
  17. 17. NI firms post the first increase in export orders since October 2007 NI New Export Business Monthly 20 25 30 35 40 45 50 55 60 65 Aug-03 Aug-05 Aug-07 Aug-09 Aug-11 Aug-13 New Export Orders No Change Source: Markit Economics & Ulster Bank NI GrowthAcceleratingContractionAccelerating
  18. 18. PMI underestimated job gains in 2012 (relative to official jobs survey). PMI signals a return to employment growth in Q3 2013 NI Employment: PMI v QES* 35 40 45 50 55 60 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13* 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 Discontinuity in QES Series Job losses Job gains *QES is DFP's official Quarterly Employment Survey of the number of jobs in NI & includes the public sector Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction,PMI 3mth averages except * average of July & August
  19. 19. Firms within the UK, RoI & NI all post strong employment gains in August Private Sector Employment Levels Monthly 30 35 40 45 50 55 60 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 NI UK RoI Source: Markit Economics & Ulster Bank NI PMI JobGainsJobLosses
  20. 20. Private sector’s profitability squeeze eases NI Private Sector Profit Squeeze 3 Month Moving Average 30 40 50 60 70 80 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Output Prices Input Prices No Change Inflation Deflation Source: Markit Economics & Ulster Bank NI Profits squeeze Price of goods & services falling
  21. 21. Regional Comparisons
  22. 22. PMIs experience a heatwave in August with strong growth reported everywhere… Output / Business Activity August 2013 50 = No change 60.7 58.4 57.2 40 45 50 55 60 65 70 NW SE Lon SW UK EM East WM NI Scot Wal Y&H NE RoI PMI index ExpansionContraction Source: Markit Economics & Ulster Bank NI PMI
  23. 23. … all the UK regions post growth over the last 3 months Output / Business Activity 3 months to August 2013 50 = No change 54.8 55.0 58.8 40 45 50 55 60 65 NW Lon SE UK SW WM East Y&H Scot Wal EM NE NI RoI PMI Index Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  24. 24. …but NI is the only UK region to post a decline in output over the last 12 months Output / Business Activity 12 months to August 2013 50 = No change 53.1 52.9 48.3 40 45 50 55 60 Wal Lon Y&H NW SE Scot UK East EM WM SW NE NI RoI PMI index ExpansionContraction Source: Markit Economics & Ulster Bank NI PMI
  25. 25. All the UK regions and the Republic of Ireland post employment growth in August … Employment Levels August 2013 50 = No change 51.8 50.9 53.6 44 46 48 50 52 54 56 58 WM NW Scot SW East NI NE UK Lon Y&H EM SE Wal RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  26. 26. … and over the last 3 months to August Employment Levels Last 3 months to August 2013 50 = No change 52.3 50.3 54.1 44 46 48 50 52 54 56 58 WM NW SW East Lon Scot UK Wal SE NE Y&H EM NI RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  27. 27. NI posts the steepest decline in employment & RoI the sharpest rise over the last 12 months Employment Levels 12 months to August 2013 50 = No change 50.7 52.3 48.5 42 44 46 48 50 52 54 WM EM SE East Scot Wal UK SW Lon NW Y&H NE NI RoI PMI Index IncreasingDecreasing Source: Markit Economics & Ulster Bank NI PMI
  28. 28. Sectoral Comparisons
  29. 29. All three broad UK sectors witness a marked acceleration in output growth in August UK Business Activity / Output - PMIs 20 30 40 50 60 70 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Services Manufacturing Construction Source: Markit Economics ExpansionContraction
  30. 30. UK economic growth accelerates in Q2 & Q3 UK GDP versus UK Composite PMI UK Composite includes Construction 25 30 35 40 45 50 55 60 65 2006 Q3 2007 Q3 2008 Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3* 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, * refers to July & August
  31. 31. RoI’s services sectors an acceleration in output growth while construction remains sub-50 – but only just RoI Business Activity - PMIs 3 month moving average 20 25 30 35 40 45 50 55 60 65 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 Manufacturing Services Construction No Change Source: Markit Economics ExpansionContraction
  32. 32. All three broad sectors reported increased levels of business activity in the 3 months to August 2013… NI Private Sector Output 3 month moving average 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Manufacturing Services Construction Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  33. 33. …with all sectors reporting job gains over the last 3 months NI PMI - Employment Index 3 month moving average 25 30 35 40 45 50 55 60 65 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Manufacturing Services Construction Source: Markit Economics & Ulster Bank NI PMI JobGainsJobLosses
  34. 34. NI’s manufacturing sector posts an acceleration in business growth & new orders over the last 3 months NI Manufacturing Activity 3 month moving average 25 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Business activity New Orders Employment Source: Markit Economics & Ulster Bank NI PMI GrowthacceleratingContractionaccelerating
  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 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  36. 36. The UK posts the strongest growth in new orders Manufacturing New Orders 3 month moving average 25 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  37. 37. N.Ireland is outperforming its European competitors Manufacturing Output - PMI 20 30 40 50 60 70 Mar-07 Feb-08 Jan-09 Dec-09 Nov-10 Oct-11 Sep-12 Aug-13 RoI Italy Spain Greece NI Source: Markit Economics PMIs ContractionExpansion
  38. 38. Cost price inflation remains for local manufacturing firms but pricing power is returning NI Manufacturing Input & Output Inflation 3 month moving average 30 40 50 60 70 80 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 No Change Input Costs Output Prices InflationDeflation Source: Markit Economics & Ulster Bank NI PMI Profits squeeze
  39. 39. PMI signals job gains in Q1 2013 followed by a fall in in Q2 2013 and another rise in Q3 NI Manufacturing Employment: PMI v QES* 30 35 40 45 50 55 60 65 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13* 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,PMI 3mth averages except * average of July & August
  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 30 35 40 45 50 55 60 65 70 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Business activity New Orders Employment Source: Markit Economics & Ulster Bank NI GrowthacceleratingContractionaccelerating
  41. 41. In July, all three economies post output growth for the first time since 2007. Growth accelerates in August… Services Output 3 month moving average 30 35 40 45 50 55 60 65 70 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI ContractionExpansion
  42. 42. … and strong new orders growth in the same three economies Services New Orders (excluding Retail ) 3 month moving average 30 40 50 60 70 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 UK NI RoI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  43. 43. NI’s services sector sees inflationary pressures ease NI Services Input & Output Inflation 3 month moving average 30 40 50 60 70 80 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 No Change Input Costs Output Prices InflationDeflation Source: Markit Economics & Ulster Bank NI PMI Profits squeeze
  44. 44. …with employment levels picking up in July & August in N.Ireland Services Employment 3 month moving average 30 35 40 45 50 55 60 65 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 UK RoI NI No Change Source: Markit Economics & Ulster Bank NI PMI ContractionExpansion
  45. 45. The services PMI finally shows employment growth after 5 years of decline NI Services Employment: PMI v QES* 40 45 50 55 60 65 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13* 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,PMI 3mth averages except * average of July & August
  46. 46. Retailers experience a retail boom in July & August Northern Ireland Retail PMI 3 monthly average 25 35 45 55 65 75 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Business Activity New Orders Backlogs No Change Source: Markit Economics & Ulster Bank NI PMI ExpansionContraction
  47. 47. Profits squeeze on local retailers eases significantly due to increased pricing power NI Retail Input & Output Inflation 3 month moving average 30 40 50 60 70 80 90 Aug-04 Feb-06 Aug-07 Feb-09 Aug-10 Feb-12 Aug-13 Input Costs Output Prices No Change InflationDeflation Source: Markit Economics & Ulster Bank NI Profits squeeze
  48. 48. NI construction sector still reports growth in output and orders. But employment dips in August NI Construction PMI 3 month moving average 20 30 40 50 60 Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13 Output New Orders Employment Source: Markit Economics, Ulster Bank PMI ExpansionContraction 50 = No change
  49. 49. …but the profits squeeze continues NI Construction Sector Profits Squeeze 3 month moving average 20 30 40 50 60 70 Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13 PMI Index Input Prices Output Prices No Change Source: Markit Economics & Ulster Bank PMI InflationDeflation
  50. 50. NI PMI has been a reasonably good predictor of actual job losses in the official employment surveys (QES) NI Construction Employment: PMI v QES 20 25 30 35 40 45 50 55 60 65 Sep-03 Dec-04 Mar-06 Jun-07 Sep-08 Dec-09 Mar-11 Jun-12 Aug-13* 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,PMI 3mth averages except * average of July & August
  51. 51. UK (59.1) & NI (51.9) construction sectors post healthy rates of growth in August. With RoI almost flat (49.7) Construction Sector Output - PMI 3 month moving average 20 30 40 50 60 Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13 PMI Index NI UK RoI Source: Markit Economics ExpansionContraction
  52. 52. New orders in the UK & NI have been rising over the last 3 months but NI posts a dip in August (47.5) Construction Sector New Orders - PMI 3 month moving average 20 30 40 50 60 Feb-09 Nov-09 Aug-10 May-11 Feb-12 Nov-12 Aug-13 PMI Index NI UK RoI Source: Markit Economics ExpansionContraction
  53. 53. Growth opportunities for NI firms within GB market particularly within the house building sector… UK Construction Activity - PMIs 3 month moving average 20 30 40 50 60 70 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Housing Activity Commercial Activity Civil Engineering Activity Source: Markit Economics ExpansionContraction
  54. 54. …but fewer opportunities in the RoI, with civil engineering remaining particularly weak Republic of Ireland Construction Activity - PMI 3 month moving average 20 30 40 50 60 70 Feb-07 Mar-08 Apr-09 May-10 Jun-11 Jul-12 Aug-13 Housing Activity Commercial Activity Engineering Activity Source: Markit Economics & Ulster Bank ExpansionContraction 50 = No change
  55. 55. Slide 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.

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