Slide pack, Ulster Bank Northern Ireland PMI, December 2013

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

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Slide pack, Ulster Bank Northern Ireland PMI, December 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 December 2013 Survey Update  Issued 13th January 2014 Richard Ramsey Chief Economist Northern Ireland richard.ramsey@ulsterbankcm.com Twitter @UB_Economics
  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 ends the year expanding at a faster rate than it started 2013 for both sectors Global Output - PMI 65 Source: Markit Economics Expansion 60 55 50 Contraction 45 40 35 30 Total Manufacturing Services 25 Apr-07 Feb-08 Dec-08 Oct-09 Aug-10 Jun-11 Apr-12 Feb-13 Dec-13
  4. 4. The Eurozone started 2013 will all sectors contracting now only construction is waiting for a return to growth 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 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
  5. 5. Vast majority of economies posting output growth with US & the UK the top performers. France is still contracting PMIs: Manufacturing Output December 2013 US UK N.Zealand* Netherlands Taiwan Japan Germany Austria Denmark Czech Republi c Italy NI EU Global EZ Turkey Ireland S.Africa* Canada Poland Switzerland Mexico Spain Vietnam Brazil China Israel** India S.Korea Greece Russia Indonesia Singapore Australia France 35 UK, NI & RoI € Source: Markit Economics Output Indices, *November ** October. For the US ISM is used. 40 45 50 55 60 65 70
  6. 6. The Republic of Ireland, the UK and NI post the fastest rates of service sector output growth in December PMIs: Services Output December 2013 Ireland UK NI US* Spain Global Russia Germany EU Japan Brazil Emerging Markets EZ China Italy France India Australia € Source: Markit Economics Output Indices, * US Non-manufacturing which is wider than services 35 40 45 50 55 60 65
  7. 7. Composite PMIs for Ireland, Spain and Italy all improve in December while France sees its contraction accelerate Composite PMIs 65 (Manufacturing & Services ** Excludes Construction**) Expansion 60 55 50 Contraction 45 40 35 30 Source: Markit Economics PMIs 25 Apr-07 Feb-08 Dec-08 Oct-09 Aug-10 Jun-11 Apr-12 Feb-13 Dec-13
  8. 8. The UK, US & China saw their composite PMIs slip in December while the Eurozone’s moved 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 Jun-08 May-09 Apr-10 Mar-11 Feb-12 Jan-13 Dec-13
  9. 9. The US, Japan & the Eurozone all posted an acceleration in manufacturing activity in December Manufacturing PMIs 65 US (ISM) China Japan Eurozone No Change 60 Expansion 55 50 Contraction 45 40 35 30 Source: Markit Economics 25 Jun-08 May-09 Apr-10 Mar-11 Feb-12 Jan-13 Dec-13
  10. 10. Growth eased in the Emerging Markets PMI due to a slowdown in China and 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 Jul-07 Jun-08 May-09 Apr-10 Mar-11 Feb-12 Jan-13 Dec-13
  11. 11. Australia’s manufacturing and services sectors remain in contraction territory in December Australia - PMI 65 Manufacturing Services No Change 60 Expansion 55 50 Contraction 45 40 35 Source: Markit Economics PMIs 30 Apr-07 Feb-08 Dec-08 Oct-09 Aug-10 Jun-11 Apr-12 Feb-13 Dec-13
  12. 12. The UK & NI see growth rates ease in December while the RoI’s posts an acceleration in its rate of growth 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  13. 13. PMI suggests growth in DFP’s new private sector composite index (combines indices for construction, services, agriculture & industrial production) in Q3 & Q4 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 Expansion 3 2 65 60 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 Q2 2004 Q4 2006 Q2 2007 Q4 2009 Q2 2010 Q4 2012 Q2 2013 Q4 40 35 30
  14. 14. NI firms report an acceleration in job creation but pace of business activity & new orders growth slows 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  15. 15. Buoyant order books suggest more growth in the months ahead. New orders remain close to recent 9-year high 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 30 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  16. 16. Surge in demand is leading to backlogs of work with NI index accelerating rapidly in Q4 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 Dec-03 Aug-05 Apr-07 Dec-08 Aug-10 Apr-12 Dec-13
  17. 17. NI firms post their 6th successive rise in export orders with December the fastest rate of growth in over 6 years NI New Export Business 70 No Change 60 Expansion New Export Orders 50 Contraction 40 30 20 Source: Markit Economics & Ulster Bank NI PMI Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  18. 18. 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 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% -0.5% 45 Job losses 40 -1.0% Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction -1.3% -1.5% 35 2003 Q4 -0.8% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 QES Q/Q 2013 Q4
  19. 19. UK, RoI & NI firms all experienced strong rates of job creation in December 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  20. 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Deflation 40 Dec-13
  21. 21. Regional Comparisons
  22. 22. Strong growth across all UK regions and the RoI in December Output / Business Activity PMI Index 70 December 2013 50 = No change 65 59.5 58.6 56.5 55 Expansion 60 50 Contraction 45 Source: Markit Economics & Ulster Bank NI PMI 40 SW WM NE Lon SE East UK EM NW Wal NI Y&H Scot RoI
  23. 23. …all the UK regions & the RoI post growth in Q4 Output / Business Activity Q4 2013 PMI Index 70 50 = No change 65 60.5 58.1 57.7 55 Contraction 50 45 Source: Markit Economics & Ulster Bank NI PMI 40 Lon SW EM SE UK NW WM East Wal Expansion 60 NI NE Y&H Scot RoI
  24. 24. … and over the last 12 months Output / Business Activity 2013 PMI Index 60 50 = No change 56.6 54.2 53.4 Contraction 50 Source: Markit Economics & Ulster Bank NI PMI 45 Lon NW SE EM Wal UK SW Y&H East WM Scot Expansion 55 NI NE RoI
  25. 25. All the UK regions and the Republic of Ireland post employment growth in December … Employment Levels December 2013 PMI Index 60 50 = No change 58 55.4 56 55.2 54.5 Increasing 54 52 Decreasing 50 48 Source: Markit Economics & Ulster Bank NI PMI 46 SW Lon SE UK NW East NI WM Y&H Scot EM Wal NE RoI
  26. 26. … and over the last 3 months Employment Levels Q4 2013 PMI Index 58 50 = No change 55.5 56 55.2 Increasing 54 52.9 52 Decreasing 50 48 46 Source: Markit Economics & Ulster Bank NI PMI 44 Lon SW SE UK East WM NW Wal NI Scot EM Y&H NE RoI
  27. 27. NI posts its first annual increase in private sector employment since 2007 Employment Levels 2013 PMI Index 56 50 = No change 54 53.5 Increasing 52.6 52 50.4 Decreasing 50 48 Source: Markit Economics & Ulster Bank NI PMI 46 WM Lon SE SW East UK NW Scot Wal EM NE Y&H NI RoI
  28. 28. Sectoral Comparisons
  29. 29. All 3 UK sectors maintain strong rates of growth in December UK Business Activity / Output - PMIs 70 Services Manufacturing Construction Expansion 60 50 Contraction 40 30 Source: Markit Economics 20 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
  30. 30. UK posts strong rates of economic growth in Q2-Q4 UK GDP versus UK Composite PMI PMI Index 65 UK Composite includes Construction GDP Q/Q Source: ONS & Markit Economics 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. 31. The RoI’s manufacturing & service sectors experience a pick-up in their growth rates in December 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 Feb-08 Dec-08 Oct-09 Aug-10 Jun-11 Apr-12 Feb-13 Dec-13
  32. 32. All 3 broad sectors within NI saw robust rates of output growth in Q4 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-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 45 Job Losses 40 35 30 Source: Markit Economics & Ulster Bank NI PMI 25 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  34. 34. NI manufacturers continue to report strong rates of growth in orders, employment & output over the last 3 months NI Manufacturing Activity 3 month moving average Business activity New Orders Employment 60 55 50 40 35 30 Source: Markit Economics & Ulster Bank NI Contraction accelerating 45 Growth accelerating 65 25 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  35. 35. UK, RoI & 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  36. 36. 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  37. 37. Lately 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 Apr-07 Feb-08 Dec-08 Oct-09 Aug-10 Jun-11 Apr-12 Feb-13 Dec-13
  38. 38. Cost price inflation remains for local manufacturing firms but pricing power is improving due to 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  39. 39. PMI underestimated jobs surge in Q2. Following further job creation in Q3, PMI suggests more of the same in Q4 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% 30 2003 Q4 -5% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 2011 Q4 No Change 2013 Q4 QES Q/Q
  40. 40. Recent growth in NI service sector output has fed through into higher levels of employment… 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  41. 41. All 3 economies post strong growth in services output in December with NI & RoI activity accelerating in Q4… Services Output (excluding Retail) 3 month moving average 70 UK NI RoI No Change Expansion 60 50 Source: Markit Economics & Ulster Bank NI PMI Contraction 40 30 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  42. 42. … and an acceleration in 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  43. 43. Output prices within service sector firms over the last 3 months rise at their fastest rate 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  44. 44. Employment growth is accelerating within the service sector in the UK, RoI and NI in Q4 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 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13
  45. 45. In Q4 the services PMI shows the fastest rate of quarterly jobs growth since Q4 2007 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 60 1.0% 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 40 2003 Q4 -1.0% 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 QES Q/Q 2013 Q4
  46. 46. NI retailers continue to report strong rates of growth in business activity and new orders in December 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  47. 47. Local retailers maintain pricing power in December 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 Dec-04 Jun-06 Dec-07 Jun-09 Dec-10 Jun-12 Dec-13
  48. 48. 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 Apr-09 Dec-09 Aug-10 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13
  49. 49. …and output prices have been rising 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 Apr-09 Dec-09 Aug-10 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13
  50. 50. NI’s construction PMI posted its 1st quarter of jobs growth in Q3 2013 since Q4 2007 with further growth in Q4 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 Job gains 55 2.5% Discontinuity in QES Series 0.0% 50 45 -2.5% 40 -5.0% 35 Job losses 30 25 -7.5% Source: DFP, Ulster Bank & Markit Economics, PMI Index 50.0 denotes threshold between expansion / contraction -10.0% 20 2003 Q4 2005 Q4 2007 Q4 PMI Employment Index 2009 Q4 No Change 2011 Q4 2013 Q4 QES Q/Q
  51. 51. Construction output growth accelerates in the UK & RoI over the last 3 months and remains strong in NI Construction Sector Output - PMI 3 month moving average PMI Index UK RoI Expansion NI 60 50 Contraction 40 30 Source: Markit Economics 20 Apr-09 Dec-09 Aug-10 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13
  52. 52. New orders growth accelerating in all 3 economies Construction Sector New Orders - PMI 3 month moving average PMI Index 70 NI UK RoI Expansion 60 Contraction 50 40 30 Source: Markit Economics 20 Apr-09 Dec-09 Aug-10 Apr-11 Dec-11 Aug-12 Apr-13 Dec-13
  53. 53. Opportunities for NI firms within GB market. House building growth recently hit a 10-year high… 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 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-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 Apr-07 Aug-08 Dec-09 Apr-11 Aug-12 Dec-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) 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 55

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