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 2016 Survey Update Issued 17th January 2017

Richard RamseyChief Economist Northern Ireland

www.ulstereconomix.comrichard.ramsey@ulsterbankcm.com

Twitter @UB_Economics

PMI SurveysPurchasing 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 hits a 13-mth high• Growth accelerates in UK, Japan, Russia, France & RoI• Chinese PMI hits highest level (53.5) since Mar-13• Eurozone composite PMI (54.4) hits highest level in >5½ yrs • Brazil (45.2) & India (47.6) composite PMIs signal contraction• Global input price inflation hits a 63-mth high• Developed & Emerging Market manufacturing PMIs hit 30-

mth & 29-mth highs• UK output growth accelerates to a 17-mth high (56.4) • RoI business activity accelerates to a 6-mth high (57.2)• NI firms report fastest rate of growth (58.7) in almost 2½yrs• NI retail sales hit a record high of 67.8• NI retailers also raising prices at a record rate

December 2016 PMIs – Key highlights

Global output growth rate at a 13-month high

UK & Japan report a marked acceleration in their growth rates in December

Developed Markets PMI hits a 12-month high while Emerging Markets rises to a 27-month high

Emerging Markets’ PMI remains in growth mode with divergence between Russia and India & Brazil

Chinese services PMI hits a 19-month high with manufacturing approaching a 4-year high

Strong growth ‘Down Under’

UK & France report a marked acceleration in growth with Italy the only economy reporting a slowdown

All sectors of the Eurozone economy in expansion mode

GDP remained stuck in a low gear in Q2 & Q3 but PMI signals more momentum in Q4

Australia, Ireland & Russia top the service sector growth league with India & Brazil at the bottom

A pick-up in manufacturing activity is evident across all economies in December

Developed & Emerging Markets manufacturing PMIs hit 30-month and 29-month highs respectively

NI firms report their fastest rate of growth in 29 months with RoI & UK firms reporting an improvement too

PMI suggests private sector growth stalls in Q3 & recovers in Q4

2014 was the 1st year in 7 years that the 4 main indicators recorded expansion, repeated in 2015 & 2016

Output & orders rebound in Q4 but pace of job creation eases. Sterling weakness triggers surge in exports

NI firms report a marked pick-up in output and new new orders growth but jobs growth remains subdued

UK & RoI firms report a marked pick-up in new orders growth overtaking NI’s growth rate

RoI, UK & NI firms report rising backlogs

NI export orders ease from their record high with £ weakness cited as a factor behind strong demand

RoI, UK & NI jobs growth accelerates with NI firms reporting the weakest rates of employment creation

Input cost inflation in Q4 hits its highest level since Q2-11. Output prices rise at their fastest rate since Q3-08

Regional Comparisons

The East of England topped the regional growth table in December with Scotland at the foot of the league table

Scotland, NI & the North East post the weakest growth rates of all the UK regions in Q4 2016

The RoI reported the fastest growth rate in business activity over the last year with Scotland stagnating

NI reports the 3rd slowest rate of job creation in the UK with Scotland & the North East the weakest

NI posts the 3rd slowest rate of employment growth of all UK regions in Q4

Scotland & the North East (job losses) were the only 2 regions not to post growth over the last 12 months

SectoralComparisons

Post-Brexit vote pessimism appears to have passed with strong growth in Q4 but will it return?

The UK’s growth rate remained relatively strong in Q3 at 0.6% q/q which was firmer than PMI suggested

Construction was the only sector in the RoI to report a slowdown in the rate of growth in December

NI retailers & manufacturing firms in growth mode in Q4 while services weak & construction in rapid decline

Subdued service sector growth with retail surging. Construction contracting & manufacturing recovering

Retail sector hits a record high (67.8) with private sector (excl. retail) at a 26-mth high

Divergence: the rate of job losses continues for construction with manufacturing & services expanding

NI’s manufacturing firms report growth across key indicators in Q4

UK manufacturing output growth moderates at a strong rate, while growth accelerates for NI & RoI firms

NI manufacturing output growth accelerates above its pre-downturn long-term average

UK firms report robust rates of growth with NI and RoI firms signalling a marked pick-up in demand too

NI manufacturing firms performing well against their Eurozone counterparts

Sterling weakness exacerbating input cost inflation in NI & UK relative to elsewhere

Input cost inflation rockets from end of Q1-16 with firms raising prices at a weaker rate

NI’s manufacturing firms reporting a slowdown in jobs growth following a ‘V-shaped recovery’

All key indicators across NI’s services sector point to low growth

UK & NI services sector output accelerates but their respective growth rates remain below RoI equivalent

The growth rate in NI’s services sector remains relatively subdued & well below its pre-downturn long-term average

New orders growth up sharply for UK & RoI firms with NI more muted.

Input cost inflation accelerates with output prices increasing at a much weaker rate

NI & UK firms report similar rates of service sector jobs growth with RoI’s rate accelerating

NI retailers are still recruiting staff at a significant rate with sales and orders growth accelerating

NI retailers report a marked acceleration in input cost inflation while output price rises pick-up sharply too

NI’s construction firms posted a contraction in all key indicators in Q4 2016

Input cost inflation accelerating at a rapid rate with firms increasing prices at a much weaker rate

NI firms report a sharp decline in output over the last 3 months in contrast to growth amongst UK & RoI firms

NI firms continue to post a slump in new orders growth in contrast to robust growth amongst RoI & UK firms

UK firms report an improvement in conditions across housing, commercial & civil engineering activity

Slowdown in construction sector briefly led to an increase in supply of sub-contractors

Optimism amongst UK construction firms remains below its long-term average

RoI housing and commercial construction activity has been improving while engineering output falls

RoI’s construction industry still reporting a decrease in the availability of sub-contractors & rising rates of pay

RoI construction firms still remain very optimistic about the year ahead and well above the long-term average

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