Ulster Bank PMI slide pack, March 2013

Ulster Bank Northern Ireland
Purchasing Managers Index (PMI)
Includes analysis of Global, Eurozone, UK, UK Regions, NI &
Republic of Ireland economic performance by sector

March 2013 Survey Update
Issued 15th April 2013

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 output growth picks up in March…

Global Output - PMI
65
Source: Markit Economics

60

Expansion
55

50

45

Contraction
40

35

30
Total Manufacturing Services
25
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

… but 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
Composite (M&S) Manufacturing Services Construction
25

Greece, Australia, France & Italy post steepest falls in
manufacturing output. Israel* posts strongest gain (*Feb)

PMIs: Manufacturing Output March 2013
Israel*
Taiwan
N.Zealand
China
Denmark
Mexico
Brazil
US
S.Korea
Global
Turkey
Vietnam
India
NI NI, RoI & UK
Russia
Japan
Indonesia
Singapore
Germany
Czech
Switzerland
Netherland
Poland
Canada
Ireland
S.Africa
UK
Austria
EU
EZ
Spain
Italy
France Source: Markit Economics Output Indices,
Australia *February
Greece

35 40 45 50 55 60 65

Services output expanding for BRICs, US, Germany, Japan,
UK & Ireland. France, Spain & Italy post the steepest declines
PMIs: Services Output March 2013
US*
Russia
China
Japan
Global
Emerging Markets
UK
Ireland
India
Germany
Brazil
Australia
NI
EU
EZ €
Italy
Source: Markit Economics Output Indices, *
Spain US Non-manufacturing which is wider than
France services

40 45 50 55 60

The 2nd, 3rd & 4th largest economies within the eurozone
are contracting at a rapid rate

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 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

… and US and China are neck and neck in terms of their
manufacturing PMIs

Manufacturing PMIs
65
US (ISM) China Japan Eurozone
60

Expansion
55

50

45

Contraction
40

35

30
25

UK posts modest growth in March with business activity
flat for the RoI and the rate of contraction eases for NI
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
Mar-04 Sep-05 Mar-07 Sep-08 Mar-10 Sep-11 Mar-13

PMI suggests private sector composite index (combines DFP indices for
construction, services & industrial production) in Q1 2013 to be flat

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 2009 = 100) up to Q3 2012 & Markit Economics

-5 30
2004 Q1 2005 Q3 2007 Q1 2008 Q3 2010 Q1 2011 Q3 2013 Q1

NI output, new orders and employment all post
modest contractions 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 eases

Private Sector New Orders
65

Orders increasing
NI UK RoI
60

55

50

45

Orders Contracting
40

35

30
Mar-03 Nov-04 Jul-06 Mar-08 Nov-09 Jul-11 Mar-13

NI’s levels of work outstanding sees its pace of decline
ease markedly over the last 3 months

Private Sector Backlogs
60
NI UK RoI

Increasing
55

50

45

Decreasing
40

35
30
Mar-03 Nov-04 Jul-06 Mar-08 Nov-09 Jul-11 Mar-13

The pace of decline in export orders accelerates in March

NI New Export Business
Monthly

Growth Accelerating
65
New Export Orders No Change
60
55
50

Contraction Accelerating
45
40
35
30
25
Source: Markit Economics & Ulster Bank NI
20

PMI underestimated job gains in Q2 & Q3 (relative to official jobs
survey) further job losses signalled in Q4 2012 but flat in Q1 2013

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 the public sector 0.8%
55 Job 0.5%
gains
0.3%
Discontinuity in QES Series
50 0.0%
-0.3%
45 -0.5%
Job -0.8%
losses
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%
PMI Employment Index No Change QES Q/Q

The UK, RoI & NI all see a fall in their respective employment
indices with NI posting a decline in staffing levels

Private Sector Employment Levels
Monthly
60
NI UK RoI

Job Gains
55

50

Job Losses
45

40

35
30
Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13

Input cost inflation eases in March (but up over last 3
months) with output prices and charges still falling

NI Private Sector Profit Squeeze
3 Month Moving Average

Output Prices Input Prices No Change
80
Profits
squeeze
70

Inflation
60

50

Deflation
40
Price of goods &
Source: Markit Economics & Ulster Bank NI services falling
30

3 UK regions & the RoI post a contraction in business
activity in March

Output / Business Activity
March 2013
PMI index
55
50 = No change

Expansion
50.9

50
49.9
48.9

Contraction
45


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

The North East posts the sharpest rate of decline over the
last 3 months followed by NI…
3 months to March 2013
PMI Index 50 = No change
56

Expansion
54
51.9
52 51.1

50

Contraction
48 48.5

46

44

42
40
Wal Y&H Lon SE Scot EM East UK NW WM SW NI NE RoI

…but NI has posted the steepest decline over the
last 12 months

PMI index 12 months to March 2013
50 = No change
55

Expansion
51.5
51.1

50

Contraction
45
44.7

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

Three English regions & NI report falling employment
levels in March …

Employment Levels
March 2013
PMI Index
54
50 = No change

Increasing
52
50.8
50.1
50

Decreasing
49.0
48

46
44
WM NE East Scot EM Wal UK SE Lon SW NW NI Y&H RoI

…and 4 UK regions (incl. NI) post job losses over last 3
months…
Employment Levels
PMI Index Last 3 months to March 2013
54
50 = No change

Increasing
52.1
52
50.6

50
49.5

Decreasing
48

46

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

NI posts the steepest decline in employment over the
last 12 months

Employment Levels
12 months to March 2013
PMI Index
50 = No change
54

Increasing
52 51.2
50.4

50

Decreasing
48
47.8

46

44

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

UK service sector growth accelerates in March, but
manufacturing & construction post contractions
UK Business Activity / Output - PMIs
70
Services Manufacturing Construction

Expansion
60

50

Contraction
40

30

20

UK composite PMI suggests Q1 2013 GDP growth will
be marginal at best

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
25 -2.5
2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1
GDP Q/Q PMI PMI No Change

Manufacturing joins construction below 50 level in the RoI

RoI Business Activity - PMIs
65
Manufacturing Services Construction No Change

Expansion
60

55

50

Contraction
45

40

35

30

25
20

NI services & construction sectors contracting but
manufacturing is growing

NI Private Sector Output
65
Manufacturing Services Construction

60

Expansion
55

50

45

Contraction
40

35
30 PMI


…with services and construction sectors still reporting
falling employment levels

NI PMI - Employment Index
65
Manufacturing Services Construction

Job Gains
60
55
50
45

Job Losses
40
35
30
25

Manufacturing posts output, employment and new
orders growth over the last three months
NI Manufacturing Activity
65

Growth accelerating
Business activity New Orders Employment
60

55

50

45

Contraction accelerating
40

35

30
25

NI outperforming the UK and the RoI in terms of
manufacturing output growth

Manufacturing Output
65
UK NI RoI No Change

Expansion
60

55

50

45

Contraction
40

35

30

NI posts the strongest growth in new orders

Manufacturing New Orders
65
UK NI RoI No Change

Expansion
60

55

50

45

Contraction
40

35

30
25

N.Ireland is outperforming its European competitors

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 easing for local manufacturing firms
and output prices are rising (return of pricing power)
NI Manufacturing Input & Output Inflation
No Change Input Costs Output Prices
80
Profits
squeeze
70

Inflation
60

50

Deflation
40

30 PMI

PMI signals job gains in Q1 but some redundancies
announced have still to take effect
PMI Index
NI Manufacturing Employment: PMI 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
losses -2%
40
Source: DFP, Ulster Bank & Markit PMI Index 50 -3%
denotes threshold between expansion /
35 contraction,PMI 3mth averages -4%

30 -5%

RoI & UK growth continues while NI’s pace of decline
eases

Services Output (excluding Retail)
70
UK NI RoI No Change
65

Expansion
60
55
50

Contraction
45
40
35
30

New orders growth slowing in the RoI & picking up
in the UK. Meanwhile NI still contracting
Services New Orders (excluding Retail )
70
UK NI RoI No Change

Expansion
60

50

Contraction
40

30

…with employment levels still falling in NI over the
last three months

Services Employment
65
UK RoI NI No Change

Expansion
60

55

50

45

Contraction
40

35
30

The services PMI signalled modest employment declines
in Q4 (& Q1). But QES posted job gains in Q4
PMI Index
NI Services Employment: PMI 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 Job 0.5%
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
75
Business Activity New Orders Backlogs No Change

Expansion
65

55

Contraction
45

35

25

Profits squeeze on local retailers appears to be easing

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 Sep-09 Apr-10 Nov-10 Jun-11 Jan-12 Aug-12 Mar-13

…with profits squeeze continuing

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

NI PMI has been a reasonably good predictor of actual
job losses in the official employment surveys (QES)
PMI Index
NI Construction Employment: PMI 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 PMI Index 50 -7.5%
Job losses
denotes threshold between expansion / contraction,PMI
25 3mth averages

20 -10.0%

UK, RoI & NI all post contractions in construction output

Construction Sector Output - PMI
PMI Index
NI UK RoI

Expansion
60

50

Contraction
40

30

20

… 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

Growth opportunities for NI firms within GB will wane
as activity eases

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 March

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

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
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Calls may be recorded.

Slide 51

Ulster Bank PMI slide pack, March 2013

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