Ulster Bank PMI Slide Pack

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

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 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

… 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

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
€

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
€

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
Source: Markit Economics PMIs
ContractionExpansion

Acceleration in growth for the US, UK, China & the
Eurozone
Composite PMIs
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

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
Contraction
Expansion

But outside of China, Russia is the only one of the
BRIC economies in expansion mode (> 50.0)
Composite PMIs
30
35
40
45
50
55
60
65
Brazil Russia India Emerging Markets No Change

… 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
Manufacturing Services No Change

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
**PMI Surveys Exclude Agriculture & Public Sector**

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

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
Business Activity New Business Employment
Source: Markit Economics & Ulster Bank NI

Forward looking indicators suggest more growth in all
three economies in the months ahead
Private Sector New Orders
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

Surge in demand is leading to backlogs of work in
NI & the UK
Private Sector Backlogs
30
35
40
45
50
55
60
Aug-03 Apr-05 Dec-06 Aug-08 Apr-10 Dec-11 Aug-13
NI UK RoI
IncreasingDecreasing

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
GrowthAcceleratingContractionAccelerating

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

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
JobGainsJobLosses

Private sector’s profitability squeeze eases
NI Private Sector Profit Squeeze
3 Month Moving Average
30
40
50
60
70
80
Output Prices Input Prices No Change
Inflation
Deflation
Profits
squeeze
Price of goods &
services falling

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

… all the UK regions post growth over the last 3 months
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

…but NI is the only UK region to post a decline in
output over the last 12 months
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

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

… 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

NI posts the steepest decline in employment & RoI the
sharpest rise over the last 12 months
Employment Levels
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

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
Services Manufacturing Construction

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

RoI’s services sectors an acceleration in output growth
while construction remains sub-50 – but only just
RoI Business Activity - PMIs
20
25
30
35
40
45
50
55
60
65
Manufacturing Services Construction No Change

All three broad sectors reported increased levels of
business activity in the 3 months to August 2013…
NI Private Sector Output
30
35
40
45
50
55
60
65
Manufacturing Services Construction

…with all sectors reporting job gains over the last 3
months
NI PMI - Employment Index
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
JobGainsJobLosses

NI’s manufacturing sector posts an acceleration in
business growth & new orders over the last 3 months
NI Manufacturing Activity
25
30
35
40
45
50
55
60
65
Business activity New Orders Employment
PMI
GrowthacceleratingContractionaccelerating

The UK, RoI and NI all witness an acceleration in
manufacturing output during the last 3 months
Manufacturing Output
30
35
40
45
50
55
60
65
UK NI RoI No Change

The UK posts the strongest growth in new orders
Manufacturing New Orders
25
30
35
40
45
50
55
60
65
UK NI RoI No Change

N.Ireland is outperforming its European competitors
Manufacturing Output - PMI
20
30
40
50
60
70
RoI Italy Spain Greece NI

Cost price inflation remains for local manufacturing
firms but pricing power is returning
NI Manufacturing Input & Output Inflation
30
40
50
60
70
80
No Change Input Costs Output Prices
InflationDeflation
Profits
squeeze

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
PMI Index
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
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
July & August

Recent growth in NI service sector output / orders is
feeding through into higher levels of employment…
NI Service Sector (excludes Retail)
30
35
40
45
50
55
60
65
70
Business activity New Orders Employment
GrowthacceleratingContractionaccelerating

In July, all three economies post output growth for the
first time since 2007. Growth accelerates in August…
Services Output
30
35
40
45
50
55
60
65
70
UK NI RoI No Change

… and strong new orders growth in the same three
economies
Services New Orders (excluding Retail )
30
40
50
60
70
UK NI RoI No Change

NI’s services sector sees inflationary pressures ease
NI Services Input & Output Inflation
30
40
50
60
70
80
No Change Input Costs Output Prices
InflationDeflation
Profits
squeeze

…with employment levels picking up in July & August
in N.Ireland
Services Employment
30
35
40
45
50
55
60
65
UK RoI NI No Change

The services PMI finally shows employment growth after
5 years of decline
NI Services Employment: PMI v QES*
40
45
50
55
60
65
PMI Index
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
Q/Q
Job losses
Job
gains
*QES is DFP's official Quarterly Employment Survey of the number of
jobs in NI and includes the public sector
July & August

Retailers experience a retail boom in July & August
Northern Ireland Retail PMI
3 monthly average
25
35
45
55
65
75
Business Activity New Orders Backlogs No Change

Profits squeeze on local retailers eases significantly due
to increased pricing power
NI Retail Input & Output Inflation
30
40
50
60
70
80
90
Input Costs Output Prices No Change
InflationDeflation
Profits
squeeze

NI construction sector still reports growth in output
and orders. But employment dips in August
NI Construction PMI
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
50 = No change

…but the profits squeeze continues
NI Construction Sector Profits Squeeze
20
30
40
50
60
70
PMI Index
Input Prices Output Prices No Change
Source: Markit Economics & Ulster Bank PMI
InflationDeflation

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
PMI Index
-10.0%
-7.5%
-5.0%
-2.5%
0.0%
2.5%
5.0%
Q/Q
Job losses
Job
gains
*QES is NI's official Quarterly Employment Survey of the no. of jobs in NI firms
July & August

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
20
30
40
50
60
PMI Index
NI UK RoI

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
20
30
40
50
60
PMI Index
NI UK RoI

Growth opportunities for NI firms within GB market
particularly within the house building sector…
UK Construction Activity - PMIs
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

…but fewer opportunities in the RoI, with civil
engineering remaining particularly weak
Republic of Ireland Construction Activity - PMI
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
50 = No change

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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.
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