Northern Ireland PMI Slide Pack November 2012

Ulster Bank Northern Ireland
Purchasing Managers Index (PMI)
November 2012 Survey Update
Issued 10th December 2012

Richard Ramsey

Chief Economist Northern Ireland

richard.ramsey@ulsterbankcm.com

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.

Global manufacturing output records positive growth for
the first time in 5 months
Global Output - PMI
65
Source: Markit Economics

Expansion
60

55

50

45

Contraction
40

35

30
Total Manufacturing Services
25
Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

All sectors within the eurozone are still contracting

Eurozone PMIs: Output
65
Source: Markit Economics Output Indices

Expansion
60

55

50

Contraction
45

40

35

30
Whole Economy Manufacturing Services Construction
25
Nov-07 Sep-08 Jul-09 May-10 Mar-11 Jan-12 Nov-12

Israel, France & Greece post steepest falls in manufacturing
output. Denmark & Mexico post strongest gains
PMIs: Manufacturing Output November 2012
Denmark
Mexico
Switzerland
India
Russia
Brazil
Ireland
N.Zealand
US
Indonesia
Vietnam
China
Turkey
UK
Austria
Global NI, RoI & UK
Canada
Germany
Poland
Netherlands
Singapore
Czech
EU
Japan
NI
S.Korea
Spain
EZ
South Africa
Taiwan
Australia
Italy
Greece Source: Markit Economics Output Indices
France
Israel

35 40 45 50 55 60 65

Republic of Ireland & the UK still outperforming their
European competitors in November
Composite PMIs
(Manufacturing & Services ** Excludes Construction**)
65

60

Expansion
55

50

Contraction
45

40

35
Source: Markit Economics PMIs

30

US remains the best performer relative to China, UK & EZ

Composite PMIs
(Manufacturing & Services ** Excludes Construction**)
65
Eurozone US (ISM) China UK
60

Expansion
55

50

Contraction
45

40
35
Mar-08 Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12

… but US manufacturing is back below 50 mark

Manufacturing PMIs
65
US (ISM) China Japan Eurozone
60

Expansion
55

50

Contraction
45

40

35

30
25
Mar-08 Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12

UK just above expansion threshold whilst the rate of
contraction remains steep for Northern Ireland

Private Sector Business Activity - PMIs
**PMI Surveys Exclude Agriculture & Public Sector**
65
NI UK RoI
60

Expansion
55

50

45

Contraction
40

35 Source: Markit & Ulster Bank NI PMI: 50 = threshold
between expansion / contraction
30
Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

PMI suggests further falls in private sector composite index (combines
DFP indices for construction, services and industrial production) in Q3 & Q4 2012

NI Private Sector Output Index Versus NI PMI
PSO Q/Q% PMI
UB PSO Left Hand Scale UB PMI Right Hand Scale
5 65
50 mark is the threshold for expansion / contraction with PMI
4
60
3
Expansion
2 55

1
50
0
45
-1
-2 40
-3
Contraction
35
-4
Source: Ulster Bank Private Sector Output (Index 2008 = 100) up to Q2 2012 & Markit Economics, *3 months to Nov-12

-5 30
2003 Q4 2005 Q2 2006 Q4 2008 Q2 2009 Q4 2011 Q2 2012 Q4*

NI output, new orders and employment all contracting
over the last 3 months
NI Private Sector Activity
3 month moving average
70
Business Activity New Business Employment
65

Expansion
60

55

50

45

Contraction
40

35
Source: Markit Economics & Ulster Bank NI PMI
30

Pace of contraction in NI new orders remains steep

Private Sector New Orders
65

Orders increasing
NI UK RoI
60

55

50

45

Orders Contracting
40

35
30

NI’s levels of work outstanding still falling at a rapid rate

Private Sector Backlogs
60
NI UK RoI

Increasing
55

50

45

Decreasing
40

35
30

Export orders have been falling since February 2008

NI New Export Business
Monthly

Growth Accelerating
65
New Export Orders No Change
60

55

50

45

Contraction Accelerating
40

35

30

25
20

PMI underestimated job gains in Q2 (relative to official Quarterly
Employment Survey – QES) further job losses signalled in Q3 & Q4 2012

PMI Index NI Employment: PMI (up to Nov-12) v QES* Q/Q
60 1.0%
*QES is DFP's official Quarterly Employment Survey of the
number of jobs in NI & includes the public sector 0.8%
55 0.5%
Job
gains 0.3%
Discontinuity in QES Series
50 0.0%
-0.3%
45 -0.5%
Job
losses
-0.8%
40 -1.0%
Source: DFP, Ulster Bank & Markit Economics, PMI
Index 50.0 denotes threshold between expansion /
-1.3%
contraction,PMI 3mth averages
35 -1.5%
Sep-03 Mar-05 Sep-06 Mar-08 Sep-09 Mar-11 Sep-12
PMI Employment Index No Change QES Q/Q

Northern Ireland’s rate of decline in employment levels
eases sharply in November
Private Sector Employment Levels
Monthly
60
NI UK RoI

Job Gains
55

50

Job Losses
45

40

35
30
Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12

Input cost inflation accelerates with output prices
and charges still falling
NI Private Sector Profit Squeeze
3 Month Moving Average
80
Output Prices Input Prices No Change

Profits
70 squeeze

Inflation
60

50

Deflation
40
Price of goods &
Source: Markit Economics & Ulster Bank NI PMI services falling

30

5 UK regions post a contraction in November with
Northern Ireland posting the steepest decline…

Output / Business Activity
PMI index November 2012
55 53.8
50 = No change

Expansion
50.2
50

45

Contraction
41.6
40

35
Wal NW Lon SE NE Y&H Scot UK EM SW East WM NI RoI

NI posts sharpest rate of decline over the last 3 months…

3 months to November 2012
PMI Index 50 = No change
54 53.2

52

Expansion
50.4

50

48

46

Contraction
44

42 42.2

40
Wal NW East Y&H Lon SE EM UK WM Scot NE SW NI RoI

……and over the last 12 months
Last 12 months to November 2012
PMI index
50 = No change
55

Expansion
52.2

50.7

50

Contraction
45

43.7

40
WM Lon Y&H EM SE UK East NW Scot Wal SW NE NI RoI

After the North West, Northern Ireland posts the
steepest decline in employment over the last month …
Employment Levels
November 2012
PMI Index
54 50 = No change

Increasing
51.8
52

50
49.4
48
47.9

Decreasing
46

44
42
Y&H EM SE SW Scot East NE WM Wal UK Lon NI NW RoI

…and steepest decline over the last 3 months…

Employment Levels
PMI index Last 3 months to November 2012
54
50 = No change

Increasing
51.9
52

50
49
48

Decreasing
46 46.4

44
42
EM WM Y&H Scot SE UK East Wal SW NW NE Lon NI RoI

…and over the last 12 months
Employment Levels
Last 12 Months to November 2012
PMI index
56 50 = No change

Increasing
54

52
50.6

50
49.9

Decreasing
48
46.9
46

44
42
EM WM Y&H SE Scot East UK SW NE NW Wal Lon NI RoI

Manufacturing & Services output above the 50
expansion threshold in November
UK Business Activity / Output - PMIs
70
Services Manufacturing Construction

Expansion
60

50

Contraction
40

30

20

UK composite PMI was more positive than official GDP
data (impacted by special factors) in 3 of the last 4 quarters
UK GDP versus UK Composite PMI
PMI Index GDP Q/Q
65 1.5
60 1
55 0.5
50 0
45 -0.5
40 -1
35 -1.5
30 -2
Source: ONS & Markit Economics ,*Q4 PMI refers to October & November
25 -2.5
2007 Q3 2008 Q2 2009 Q1 2009 Q4 2010 Q3 2011 Q2 2012 Q1 2012 Q4*
GDP Q/Q PMI PMI No Change

Services & manufacturing are above 50 in the RoI

RoI Business Activity - PMIs
65
Manufacturing Services Construction No Change

Expansion
60

55

50

Contraction
45

40

35

30

25
20

All sectors in NI contracting….

NI Private Sector Output
65
Manufacturing Services Construction

60

Expansion
55

50

Contraction
45

40

35
Source: Markit Economics & Ulster Bank NI
30

… all NI sectors post employment declines over last 3
months although manufacturing posts growth in November
NI PMI - Employment Index
65
Manufacturing Services Construction

Job Gains
60
55
50
45

Job Losses
40
35
30
25

Pace of decline in manufacturing eases with growth
in employment and new orders in November
NI Manufacturing Activity
65

Growth accelerating
Business activity New Orders Employment
60

55

50

Contraction accelerating
45

40

35

30
PMI
25

NI & UK manufacturing performance is converging
whilst the RoI continues to outperform
Manufacturing Output
65
UK NI RoI No Change

Expansion
60

55

50

45

Contraction
40

35
30
Nov-03 May-05 Nov-06 May-08 Nov-09 May-11 Nov-12

…and new orders still falling in NI & the UK
Manufacturing New Orders
65
UK NI RoI No Change

Expansion
60

55

50

45

Contraction
40

35

30
25

N.Ireland lagging economies elsewhere

Manufacturing Output - PMI
70
Source: Markit Economics PMIs

Expansion
60

50

Contraction
40

30
China Germany US NI UK
20

Ireland outperforming its euro zone partners

Manufacturing Output - PMI
70
RoI Italy Spain Greece NI

Expansion
60

50

40

Contraction
30

Source: Markit Economics PMIs, NI is 3 month moving average
20

Cost price inflation accelerating for local manufacturing
firms & pricing power still falling = profits squeeze

NI Manufacturing Input & Output Inflation
No Change Input Costs Output Prices
80
Profits
squeeze

70

Inflation
60

50

Deflation
40

30

PMI signals no major manufacturing job losses in Q3 and
Q4 but FG Wilson announcement still to take effect

PMI Index
NI Manufacturing Employment: PMI (Nov-12) v QES* Q/Q
65 4%
*QES is DFP's official Quarterly Employment
Survey of the number of jobs in NI firms 3%
60 Discontinuity in
QES Series Job
gains 2%
55
1%
50 0%

45 -1%

Job -2%
40 losses
-3%
35 Source: DFP, Ulster Bank & Markit Economics, PMI
Index 50.0 denotes threshold between expansion / -4%
30 -5%

RoI growth accelerates while NI-UK divergence
within service sector remains…
Services Output (excluding Retail)
70
UK NI RoI No Change
65

Expansion
60

55

50

Contraction
45

40

35

30

…with significant gap in new orders remaining

Services New Orders (excluding Retail )
70
UK NI RoI No Change

Expansion
60

50

Contraction
40

30

…with employment levels still falling in NI & now UK

Services Employment
65
UK RoI NI No Change

Expansion
60

55

50

45

Contraction
40

35
30

The PMI has signalled more job losses than the official data
have indicated so far. But PMI includes private sector only

PMI Index
NI Services Employment: PMI (up to Nov-12) v QES* Q/Q
65 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%

55 0.5%
Job
gains

50 0.0%

45 -0.5%
Source: DFP, Ulster Bank & Markit Economics, PMI
Index 50.0 denotes threshold between expansion /
contraction,PMI 3mth averages Job losses
40 -1.0%

Local retailers still reporting falling orders & activity

Northern Ireland Retail PMI
3 monthly average
70
Business Activity New Orders Backlogs No Change
65

Expansion
60

55

50

Contraction
45

40

35

30
25

Profits squeeze on local retailers intensifies
NI Retail Input & Output Inflation
90
Input Costs Output Prices No Change
Profits
80
squeeze

Inflation
70

60

50

Deflation
40
30

NI construction sector still in the midst of a severe downturn

NI Construction PMI

Output New Orders Employment

Expansion
60

50 = No change
50

Contraction
40

30

Source: Markit Economics, Ulster Bank PMI

20
Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12

…….with profits squeeze intensifying
NI Construction Sector Profits Squeeze
PMI Index
Input Prices Output Prices No Change
70

Inflation
60

50

Deflation
40

30
Source: Markit Economics & Ulster Bank PMI
20
Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12

NI PMI has been a reasonably good predictor of actual
job losses in the official employment surveys (QES)

PMI Index
NI Construction Employment: PMI (to Nov-12) v QES* Q/Q
65 5.0%
*QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms
60
Job 2.5%
55 gains
50 0.0%

45
-2.5%
40

35 -5.0%

30
Source: DFP, Ulster Bank & Markit Economics, PMI Job losses -7.5%
25 Index 50.0 denotes threshold between expansion /
20 -10.0%

Significant NI-UK divergence remains with output

Construction Sector Output - PMI
PMI Index
NI UK RoI

Expansion
60

50

Contraction
40

30

20
Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12

… and with new orders falling in NI, UK & RoI
Construction Sector New Orders - PMI
PMI Index

NI UK RoI

Expansion
60

50

Contraction
40

30

20
Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12

Growth opportunities for NI firms within GB will wane
as activity eases but pick-up in civil engineering sector
UK Construction Activity - PMIs
70
Housing Activity Commercial Activity Civil Engineering Activity

Expansion
60

50

40

Contraction
30

20

Lack of opportunities in the RoI with all construction
sub-sectors declining in November
Republic of Ireland Construction Activity - PMI

70
Housing Activity Commercial Activity Engineering Activity

Expansion
60

50 = No change
50

40

Contraction
30
Source: Markit Economics & Ulster Bank

20
Mar-07 Aug-08 Jan-10 Jun-11 Nov-12

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Slide 51

Northern Ireland PMI Slide Pack November 2012

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