BPFI SME Market Monitor Final Report · 2018-03-09 · BPFI SME Market Monitor Final Report 1 1...

BPFI SME Market Monitor

Final Report

March 2018

This is the thirteenth publication of the BPFI SME Market Monitor, prepared for the Banking & Payments Federation Ireland (BPFI) . The purpose of this Market Monitor is to present up to date trends across a range of indicators which are important for the performance of the SME sector . With SMEs (employing less than 250 persons) accounting for the overwhelming majority of enterprises, 69% of persons engaged, 56% of turnover and 50% of Gross Valued Added (GVA) , their performance is very closely linked with the overall health of the economy. How consumers feel about the overall state of the economy, their personal financial situation and their ability to make purchases will influence the performance of SMEs. The level of confidence amongst businesses is equally important, as the more confident business owners and managers are, the greater the prospects for their companies, overall employment and incomes. They are also more likely to make investment and purchase decisions.

In a report prepared for the BPFI in 2013 , it was noted that the highest concentration of Irish SMEs are in Accommodation and Food services, Construction and Real Estate activities, while Motor and Wholesale Trades as well as Professional, Scientific and Technical services also figure prominently in terms of employment. A number of challenges have existed for SMEs following the unprecedented economic adjustment over the recession years which hit many SMEs especially hard. While the environment is improving, the return to more sustainable growth and trading conditions should ensure that SMEs remain central to Ireland’s economic and jobs recovery.

This publication monitors a number of indicators that influence the circumstances under which SMEs conduct their business. A total of 15 indicators, which are published on a quarterly and/or monthly basis, are presented in tabular and graphical form with a brief commentary. This publication also contains a summary commentary which seeks to bring an overall assessment of what these indicators are telling us about the environment for SMEs. The indicators presented are grouped under four headings:

Introduction

BPFI SME Market Monitor Final Report 1

1 This report is produced by EY-DKM. EY-DKM was given editorial independence by Banking & Payments Federation Ireland (BPFI) to prepare its views, analysis, forecasts and economic commentary on data and statistical trends related to the SME sector. The views expressed herein are EY-DKM’s views and do not necessarily coincide with the views of BPFI. To the fullest extent permitted by law, Ernst & Young and its members, employees and agents do not accept or assume any responsibility or liability in respect of this report, or decisions based on it, to any reader of the report. Should such readers choose to rely on this report, then they do so at their own risk.

2 The data in this Monitor is based on data published up to 5th March 2018.3 http://www.cso.ie/en/releasesandpublications/ep/p-bii/bii2014/4 http://www.bpfi.ie/publications/sme-lending-market-in-ireland/

The data includes a number of the published sentiment indicators, including those from the ESRI, KBC and Investec. Much of the macroeconomic and sectoral data comes from the Central Statistics Office while the SME lending data is from the Central Bank of Ireland. Where data is known to be affected by seasonal patterns, the CSO presents seasonally adjusted (SA) data which allow month on month (MoM) or quarter on quarter (QoQ) trends to be analysed. The seasonally adjusted data can vary each month/quarter as new observations are added and these changes will be reflected in subsequent issues of the BPFI SME Market Monitor. Unadjusted data are analysed on a year-on-year (YoY) basis.

This publication appears in electronic on BPFI’s website: http://www.bpfi.ie and is available on http://www.ey.com/ie/en/services/transactions/ey-dkm-economic-advisory

Sentiment indicators

Macroeconomic indicators

Sectoral indicators

Lending indicators

The Irish economy continues to grow strongly, although ongoing global risks present challengesThe upward trajectory of the Irish economy and the fact that Ireland, for the moment, has

weathered Brexit and other global concerns better than had been feared, seems to have made

consumers and manufacturers more confident. Although the outturn of Phase 2 of Brexit

negotiations and changes in US tax policies may disrupt this growth, the SME environment

remains considerably positive with policy announcements such as the National Planning

Framework (NPF) and the National Development Plan (NDP) offering further opportunities for

Irish enterprises, including SMEs. Given that the NDP commits €116 billion to upgrading the

State’s infrastructure over ten years, SMEs should benefit either directly, in the contracting

phase, or indirectly from the provision of goods and services to firms directly involved in the

delivery of projects.

The consistent improvement in the SME environment is evident from the positive developments

in almost all of the indicators tracked in the Monitor. According to the latest KBC/ESRI

Consumer Sentiment Index, consumer confidence fell back in February 2018 from its highest

level in seventeen years but the January results likely reflected seasonal factors and it was still

higher than at any point in Q4 2017. The latest results reflect an improving economy but

modest income growth. Indeed, Weekly Earnings grew by only 2% YoY in Q4 2017, while

earnings in businesses employing few than 50 people fell by 3.8% YoY. Strong confidence was

also an underlying theme in the latest Markit/Investec Purchasing Managers Index, as Irish

manufacturing firms remained strongly optimistic regarding the 12-month outlook for

production in February. Growth in the industry can be credited to a rise in new orders, with new

export business recording substantial growth in the month. Strong demand from international

markets such as Europe, Africa and Asia have been credited for this notable rise.

The release of the Q3 2017 National Accounts is also encouraging for the SME sector. Modified

Domestic Demand, which excludes the distortionary effects of Multinational companies,

showed that domestic activity experienced solid growth, while Personal Consumption was up by

2.7% YoY in the quarter. According to the Q3 2017 Labour Force Survey, Employment rose to

2.2 million, implying that total employment is now at its highest level since Q3 2008. In Q3

2017, Total Disposable Income rose to €25.8 billion, while in the year to Q3 2017, total

disposable income amounted to €76.4 billion, up 5.4% or €3.9 billion on the corresponding

period in 2016.

Continuous increases in disposable income and employment throughout 2017 have positively

affected retail sales. The Retail Sales Index with or without motor trade, registered annual

increases in 2017, equivalent to 4.3% for all Retail Businesses and 7% when Motor Trades are

excluded. With the exception of Motor Trades, all retail sectors experienced an increase in sales

relative to 2016, with the highest seen in Furniture and Lighting (+15.8%), Electrical Goods

(+11.7%) and Pharmaceutical, Medical and Cosmetic articles (+6.4%).

A total of 2.58 million Overseas Tourists came to Ireland in Q4 2017, representing a notable

increase of 5% on the previous quarter, while annual growth was also up by 6.2%. For the year

as a whole, 9.94 million tourists visited Ireland, an increase of 3.5% on 2016. For the first time

since the Brexit referendum result, the number of visitors coming from Great Britain (GB)

registered quarterly and yearly growth of 5.4% and 0.8% respectively. While this is good news

for SMEs such as Hotels, Bars, Restaurants and Café’s, Brexit and the subsequent weak value

of the Sterling have had an immediate impact on the Irish agricultural sector. The Food

Production Index experienced notable monthly declines throughout 2017, with output in the

sector falling in eight of the last twelve months. For 2017 as a whole, Food Production was

down 1.5% compared to 2016.

The level of debt accumulated by Irish SMEs continued to fall, reaching €12.5 billion in Q3

2017. This represented a decline of €1.7 billion or 11.9% YoY. Furthermore, the opening nine

months of 2017 saw total new lending to SMEs rise to €1.97 billion, up 13% or €227 million on

the corresponding period in 2016.


In summary, the Irish economy continues to grow strongly, with notable improvements in employment, production and consumption. Although this could change in the medium term, depending on the outcome of global risks, government infrastructure programmes from the NPF and the NDP should offer further opportunities to SMEs across the country.

Section 1



The KBC/ESRI Consumer Sentiment Index fell from its 17-year high of 110.4 in January 2018 to 105.2 in February. This fall may partly reflect a correction to the exceptionally strong January report, and the latest results are still broadly positive.

It suggests that the improving Irish economy is now being felt more broadly by Irish consumers and while it does not appear to be delivering massive gains in purchasing power, it is easing household’s financial strains.

There were notably greater positive than negative responses to each of the five key questions on which the survey is based. However, the proportion of consumers that see their personal financial circumstances improving in the next twelve months dropped to 25% in February, its lowest level in fourteen months. This may reflect modest income growth at a time of general economic improvement.

The Markit/Investec Purchasing Managers Index fell from 57.6 in January to 56.2 in February, with the latest reading signalling a further improvement in business conditions, albeit the weakest since October last year.

Much of this improvement can be credited to a rise in new orders, with new export business recording substantial growth in February. Strong demand from international markets such as Europe, Africa and Asia have been credited for this notable rise.

With new orders increasing, manufacturers raised their staffing levels, albeit the rate of growth in employment eased for the second month running. Although purchasing activity also rose sharply, extending the current sequence of expansion to 18 months, the rate of growth was the weakest in close to a year. Input costs remained well above the series average in February, while the rate of output price inflation quickened to a four month high.


Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18

Monthly Index 105.8 104.8 103.6 103.2 110.4 105.2

Annual change in the level 3.8 7.5 5.9 7.1 7.3 4.5

Monthly change in the level 2.9 -1.0 -1.2 -0.4 7.2 -5.2

3 month moving average 104.6 104.5 104.8 103.9 105.8 106.3

Figure 1: Consumer Sentiment Index

Source: KBC/ESRI

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Figure 2: Manufacturing PMI (SA)

Source: Markit/Investec

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50 = no change on previous month

Increasing rate of return

Decreasing rate of return

Despite fall in Consumer Confidence, February results remain broadly positive Manufacturing output continues to rise, albeit at a slower rate

Source: KBC/ESRI

Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18

PMI (SA) 55.4 54.4 58.1 59.1 57.6 56.2

Monthly Change -0.7 -1.0 3.7 1.0 -1.5 -1.4

Source: Markit/Investec

Consumer Sentiment Index Manufacturing PMI

Section 2



Upon examination of the latest Quarterly National Accounts, it is clear that changes in the importation of intellectual property assets and accounting activities of re-domiciled companies continue to cause considerable fluctuations in Total Domestic Demand, with this indicator dropping by 13.1% in Q3 2017.

Much of this quarterly fall was predominantly due to a notable decline in Gross Domestic Fixed Capital Formation, (-36% QoQ), while Personal Consumption and Government Expenditure experienced quarterly growth of 1.9% and 0.7% respectively.

However, Modified Total Domestic Demand, which provides a more realistic snapshot of domestic activity by removing the above distortions, actually recorded an expansion of 2.9% in Q3 2017. When the effects of IP imports and redomiciled companies are removed, investment rose to €12 billion, which represented an annual and quarterly increase of 11.4% and 4.9% respectively.

The seasonally adjusted unemployment rate remained unchanged at 6.7% in Q3 2017, as the total persons classified as unemployed stood at 156,400. Although this represents a drop of 36,000 compared to last year, unemployment did rise marginally by 1,400 relative to the previous quarter.

Despite this, the latest monthly unemployment data showed that the rate for February was 6%, down from 6.1% in January 2018 and down from 7.3% in February 2017. A total of 141,600 people were unemployed in February 2018, representing a decrease of 28,000 when compared to February 2017 and a decline of 2,300 relative to the previous month.

Continued improvements in the labour market can only be positive for the SME sector, as increased employment should encourage greater consumer confidence and consumption, which in turn should subsequently induce companies to expand production and employment levels accordingly.

BPFI SME Market Monitor Final Report

6

Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17

Total Domestic Demand 55,493 55,131 57,291 45,760 54,708 47,530

QoQ % Change 25.2% -0.7% 3.9% -20.1% 19.6% -13.1%

Modified Domestic Demand 41,719 41,934 43,904 41,888 44,423 45,715

QoQ % Change -0.2% 0.5% 4.7% -4.6% 6.1% 2.9%

Figure 3: Domestic Demand SA (€m, constant 2015 prices)

Source: CSO, National Accounts

Figure 4: Unemployment Rate (SA)

Source: CSO, Labour Force Survey (LFS)

Modified Domestic Demand continued its upward trend in 2017 Downward trend in unemployment rate continued in Q3 2017

Source: CSO, National Accounts. Seasonally adjusted (SA)

Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17

Rate (SA) 8.8% 8.3% 7.6% 7.2% 6.7% 6.7%

Number (000s SA) 205.2 192.4 176.0 168.1 155.0 156.4

Source: CSO, Labour Force Survey (LFS) (SA)

€30,000

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Total Domestic Demand

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10.9%10.6%

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Domestic Demand Unemployment Rate


Following marginal quarterly growth of 0.4%, total disposable income rose to €25.8 billion in Q3 2017. In the year to Q3 2017, total disposable income amounted to €76.4 billion, representing an increase of 5.4% or €3.9 billion on the corresponding nine months in 2016.

Encouragingly for SMEs, consumer expenditure expanded on a yearly basis by 4.1%, while in the year to Q3 2017 consumer spending was up by 3% or €2 billion. That said, gross savings recorded substantial annual growth of 18.5%, generating a savings ratio of 8.9% in Q3 2017. For the opening three quarters of 2017, gross savings came to €6.4 billion, a rise of 41.3% on the same period in 2016.

BPFI SME Market Monitor Final Report7

Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3’17

Total Disp. Income 24,053 23,914 24,539 24,857 24,979 25,681 25,789

QoQ % Change 3.2% -0.6% 2.6% 1.3% 0.5% 2.8% 0.4%

Consumption Exp. 22,698 22,605 22,635 22,922 23,198 23,238 23,565

QoQ % Change 2.0% -0.4% 0.1% 1.3% 1.2% 0.2% 1.4%

Gross Saving 1,197 1,366 1,937 2,052 1,518 2,545 2,295

QoQ % Change 6.5% 14.1% 41.8% 5.9% -26.0% 67.7% -9.8%

Savings Ratio 5.0% 5.7% 7.9% 8.3% 6.1% 9.9% 8.9%

Figure 5: Household Disposable Income and Savings Ratio (€ millions, current prices) SA

Source: CSO. *Consumption Expenditure (CE) here excludes Government social transfers which are included in the CE definition for National Accounts purposes

Having already surpassed pre-crash levels, disposable income continues to rise

Source: CSO. (SA)

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Total Disposable Income

Consumer Expenditure

Savings Ratio (right hand scale)

Investment

Employment

Sentiment

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Turnover

Cashflow

Collateral

Finance

Food

Accommodation

Construction

Retail

Disposable Income and Savings

Section 3

Sectoral Indicators

Sectoral indicators

Modest annual growth of 2% led to average weekly earnings in the economy reaching €726 or €37,768 per annum in Q4 2017. Overall earnings are now 5.3% higher relative to their low point in Q4 2011, when average weekly earnings stood at €690. For the year as a whole, overall earnings were up 2.3% relative to 2016.

Earnings in large businesses with more than 250 employees continued to grow, as Q4 2017 registered modest annual growth of 1.8%. Earnings in medium size companies, with 50-250 employees registered strong year on year growth of 4.6% in the quarter.

Following four consecutive quarters of growth, earnings in small businesses, with less than 50 employees recorded a notable annual decline of 3.8% in Q4 2017. As a result, earnings in small businesses were 5.9% off their pre-crash peak in Q3 2008.

Relative to the previous year, employment was up by 2.2% in Q3 2017, bringing total employment to 2.2 million. Total employment is now at its highest level since Q3 2008. Of the 48,100 new jobs created over the 12 months to Q3 2017, 29% can be credited to the four sectors with the greatest concentration of SMEs, highlighting the importance of the SMEs sector to the Irish economy.

Of the four sectors, Construction continued to be the fastest growing sector, with employment up by 6.9% or 8,300 compared to Q3 2016. Despite such growth, employment in the sector still remains 47% off its previous peak in Q2 2007. Following modest growth of 1.5%, total employment in Wholesale and Retail amounted to 304,300, its highest levels since Q4 2008. For the second quarter in a row, employment growth in the Accommodation and Food sector eased to 1.3%, while employment in Real Estate activities was down 7.8%.


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Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Under 50 553.82 563.84 569.11 567.73 569.86 542.31

YoY% Change -0.1% 1.6% 2.6% 2.2% 2.9% -3.8%

50 - 250 656.04 645.77 656.07 662.98 669.56 675.35

YoY% Change -1.3% -1.3% -0.7% 0.9% 2.1% 4.6%

250 + 842.85 848.04 853.56 856.5 863.17 863.67

YoY% Change 2.0% 2.4% 1.9% 2.7% 2.4% 1.8%

Figure 6: Weekly Earnings by Size of Business (€) SA

Source: CSO

Figure 7: Employment by Sector YoY % Change

Source: CSO, LFS, not SA

Following annual growth of 2%, average weekly earnings reach €726 A total of 48,100 new jobs created in year to Q3 2017

Source: CSO

YoY% Change Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17

All sectors 3.8% 3.8% 3.8% 3.7% 2.5% 2.2%

Construction 9.6% 8.4% 10.3% 9.3% 6.8% 6.9%

Wholesale and retail trade 1.9% 3.0% 1.7% 2.0% 2.2% 1.5%

Accommodation and food 5.2% 8.1% 1.5% 5.6% 2.7% 1.3%

Real estate -10.2% 0.0% 22.4% -2.7% -9.6% -7.8%

Source: CSO, LFS, (NSA)

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All Sectors

Construction

Wholesale & Retail Trade

Accommodation & Food Service activities

Real Estate

Weekly Earnings by size of Business Employment by Sector

Sectoral indicators

Having registered considerable monthly growth of 11.7% in July, the Retail Sales Index subsequently declined in three of the last five months of 2017, with December dropping marginally by 0.1%.

When Motor trades are excluded, the rate of decline reached 1%. Despite this, both indices registered overall annual increases in 2017, equivalent to 4.3% for all Retail Businesses and 7% when Motor Trades are excluded.

The majority of retail sectors experienced a decline in sales, with the highest monthly fall seen in electrical goods (-17.9%). Other sectors to record notable declines in sales were Department Stores (-4%), Specialised stores (-2%), Hardware, paint and glass and Motor Trade (both -1.6%). The largest increases were recorded by Books, Newspapers and Stationery, and Furniture and Lightning (both +3.1%).

A total of 2.58 million visits were made to Ireland in Q4 2017, representing a notable increase of 5% on the previous quarter, while annual growth was up by 6.2%. For the year as a whole, 9.94 million tourists visited Ireland, which was an increase of 3.5% on 2016. The latest data from Fáilte Ireland showing that revenue from overseas visitors amounted to €5.1 billion per annum, will be welcome news for SMEs operating in the sector.

For the first time since the Brexit referendum result, there was an increase in the number of visitors coming from Great Britain (GB), with strong quarterly growth of 5.4% in the final quarter. The corresponding annual growth was a very modest 0.8% in 2017.

Visitor numbers coming from North America and Mainland Europe, experienced exceptional annual growth, increasing by 9.1% and 12% respectively YoY in Q4 2017. For the fourth quarter in a row, visitors from other areas (outside of GB, US and Europe) fell, with numbers down 0.2% on an annual basis.


10

Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

Retail Sales Index 136.1 130.6 130.5 130.4 134.6 134.5

MoM % Change 11.7% -4.0% -0.1% 0.0% 3.2% -0.1%

Index ex. Motor 123.3 123.5 125.0 124.8 128.1 126.8

MoM % Change 0.4% 0.2% 1.2% -0.2% 2.7% -1.0%

Figure 8: Retail Sales Volume Index (2010 = 100) SA

Source: CSO

Figure 9: Overseas Trips to Ireland SA

Source: CSO

Retail sales up 4.3% on average in 2017 relative to the previous year A total of 9.94 million tourists visited Ireland in 2017, up 3.5% on 2016

Source: CSO. (SA)

Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17

Overseas Visitors (SA) 2.42 2.43 2.44 2.47 2.46 2.58

QoQ % Change 1.6% 0.3% 0.3% 1.4% -0.5% 5.0%

Source: CSO. (SA)

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UK visitors YoY % change

Retail Sales Volume Index Overseas Trips to Ireland

Sectoral indicators

Having recorded four consecutive months of growth between July and October, the Industrial Production Index registered a significant decline of 9.7% in November, albeit December did see a modest recovery of 3.1%. For the year as a whole, the Index was down 2.4% when compared to 2016.

Following a notable monthly fall of 11.8% in November, output levels in the Modern sector also rebounded in December, increasing by 4.4%. That said, output in the Chemical and Chemical products sector was down by 13.8% in December while the output of Electrical equipment also declined on a monthly basis by 2.8%. Fluctuations in the Traditional sector were much less volatile with annual and monthly growth of 0.9% and 1.9% in December 2017.

Since reaching a new high of 131.4 in July 2017, the performance of the Service Index has been quite mixed, with monthly declines recorded in seven of the last twelve months, while the year finished with consecutive declines in November (-0.9%) and December (-0.7%). That said, for 2017 as a whole, the Index was still up 2.3% compared to 2016.

The marginal decline in December can be credited to monthly falls in prominent sectors such as Wholesale Trade (-4.5%), Accommodation (-2.2%), and Information and Communication (-0.8%). However, there were significant monthly increases seen in Professional, Scientific and Technical activities (+11%), Food Service activities (+2.5%) and Transportation and Storage (+1.5%).

BPFI SME Market Monitor Final Report11


Manuf. Industries 156.7 160.7 162.6 181.6 164 169.1

MoM % Change 1.2% 2.5% 1.2% 11.6% -9.7% 3.1%

Traditional sector 121.4 117.1 117.4 121.8 120.7 123.0

MoM % Change 1.4% -3.5% 0.3% 3.7% -0.9% 1.9%

Modern sector 180.1 174.9 183.4 208.5 183.9 192.0

MoM % Change 6.6% -2.9% 4.9% 13.7% -11.8% 4.4%

Figure 10: Industrial Production Index SA (Vol. 2010 = 100)

Source: CSO Methodological changes from Jan 2014 (reclassification of some service companies to Industry) and rebasing to 2010 from 2005.

Figure 11: Services Index (Value 2010 = 100, SA)

Source: CSO. This is an output value Index with 2010 as the base year.

Industrial Production down 2.4% in 2017 on an annual basis Service Index declines in seven of the last twelve months

Source: CSO. (SA): Manufacturing excludes Electricity & Gas, Mining & Quarrying, which are included in Traditional


Services 131.4 123.4 125.8 128.5 127.4 126.5

MoM % Change 5.3% -6.1% 2.0% 2.1% -0.9% -0.7%

W&R & Motor Trade 139.3 135.2 132.0 132.8 133.3 126.2

MoM % Change 11.0% -3.0% -2.3% 0.6% 0.4% -5.3%

Source: CSO. (SA): Index covers non-financial traded services. This index covers all enterprise with a turnover of over €20m and more than 100,000 persons engaged

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b-1

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r-1

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n-1

7

Au

g-1

7

Oct

-17

De

c-1

7

Services

Wholesale and Retail Trade

Industrial Production Index Service Index

Sectoral indicators

The B&C Production Index continues to record double digit growth, with Q3 2017 recording a substantial annual expansion of 18.4%. Although this is the seventh consecutive quarter of growth, output in the industry still remains 59.2% off its previous peak in Q4 2006, while output is at its highest level since Q2 2009.

Of the three components that make up the Index, Residential building was by far the fastest growing sector, with output up by 37.7 per cent. There was relatively modest growth in Non-Residential and Civil Engineering building, with output increasing by 4.5% and 2.4%respectively.

The Ulster Bank Construction PMI posted a reading of 61.4 in January, with the latest reading signalling a substantial monthly increase in total activity. Confidence among clients regarding economic conditions resulted in further growth of new orders in January while rising workloads led construction firms to increase their staffing levels again, with job creation growing at its fastest since August.

Although the Food Production Index finished 2017 with solid monthly growth of 4%, output in the sector has fallen in eight of the last twelve months. For 2017 as a whole, the Food Production Index was down 1.5% compared to last year, with persistent volatility in Sterling likely to be the cause of this drop.

Despite this, the Index finished the year on a positive note, with monthly increases registered in all but one of the sub sectors. The fastest growing sub sectors were Dairy Products (+4.8%) and Bakery and Farinaceous products (+5.3%). Marginal growth was also recorded in Grain Mill and Starch Products; Prepared Animal Feeds (+0.5%) and Other Foods (+0.6%). Meat and Meat Products was the only sub sector that fail to record monthly growth, following a decline of 2.1%.


12

Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

All building and construction SA 127.8 128.0 130.2 138.7 142.8 151.5

QoQ % Change 11.3% 0.2% 1.7% 6.5% 3.0% 6.1%

YoY% Change 20.0% 19.7% 17.5% 20.8% 11.7% 18.4%

Figure 12: Construction Production Index SA (Volume 2010 = 100)

Source: CSO

Figure 13: Food Production Index SA (Vol. 2010 = 100)

Residential building was by far the fastest growing sector of B&C Index Food production in 2017 was down 1.5% compared to last year

Source: CSO. (SA)


Food products 134.9 130.7 129 149 135.8 141.3

MoM % Change -1.8% -3.1% -1.3% 15.5% -8.9% 4.0%

Source: CSO. (SA)

0

40

80

120

160

200

Q3

14

Q4

14

Q1

15

Q2

15

Q3

15

Q4

15

Q1

16

Q2

16

Q3

16

Q4

16

Q1

'17

Q2

'17

Q3

'17

Residential building

Non-residential building

Civil engineering

All building and construction

Source: CSO

80

90

100

110

120

130

140

150

160

170

De

c-1

4

Fe

b-1

5

Ap

r-1

5

Ju

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Au

g-1

5

Oct

-15

De

c-1

5

Fe

b-1

6

Ap

r-1

6

Ju

n-1

6

Au

g-1

6

Oct

-16

De

c-1

6

Fe

b-1

7

Ap

r-1

7

Ju

n-1

7

Au

g-1

7

Oct

-17

De

c-1

7

Construction Production Index Food Production Index

Section 4

Lending indicators

Lending indicators

In Q4 2016, total new lending to SMEs amounted to €867 million, which is the highest level seen since records began in 2010. Since then, growth has eased in each of the last three quarters, with the latest data showing an annual decline in lending of 9.3% in Q3 2017. That said, the opening nine months of 2017 saw total new lending to SMEs rise to €1.97 billion, up 13% or €227 million on the corresponding period in 2016.

Wholesale and Retail Trade & Repairs continued to receive the largest share of new lending, accounting for 20.9%. Other sectors to receive noteworthy shares of total new lending included:

► Manufacturing (13.3% of total new lending)

► Business and Administrative Services (13.1%)

► Hotels and Restaurants (12.9%)

► Other Community, Social and Personal Services (11.9%)

According to the above definition* the level of debt accumulated by Irish SMEs continued to fall in 2017, with total outstanding debt amounting to €12.5 billion in Q3 2017. Relative to the previous period in 2016, this represented an annual decline of €1.7 billion or 11.9%, with the rate of debt reduction ranging between 11-12% in the last four quarters.

Ten of the twelve sectors under examination registered annual declines in their respective debt levels, with the largest percentage drop recorded by the Construction sector (-26.2% YoY). In absolute terms, the Wholesale/Retail Trade & Repairs sector registered the largest annual decline, with outstanding debt down by €0.52 billion. Other sectors to record notable absolute declines were:

► Hotels and Restaurants (-€0.21 billion YoY)

► Construction (-€0.20 billion YoY)

► Business and Administrative Services (-€0.19 billion YoY)

► Human Health and Social Work (-€0.17 billion YoY)


Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Total New Lending 720 537 867 744 740 487

YoY % Change 29.5% 19.3% 73.4% 52.8% 2.8% -9.3%

Figure 14: New Lending to SMEs (€m) and Rate of Change

Source: Central Bank

Figure 15: Outstanding Debt (€m) and Rate of Change

Source: Central Bank

New lending to SMEs has eased in each of the last three quarters Total outstanding debt amounted to €12.5 billion in Q3 2017

Source: Central Bank *Total lending ex Financial Intermediation, Real Estate and Primary Industry lending - see Note (1).

Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17

Total Outstanding Debt 14,765 14,154 13,501 13,173 12,995 12,470

YoY % Change -13.0% -11.1% -12.3% -11.5% -12.0% -11.9%

Source: Central Bank *Total outstanding debt ex Financial Intermediation, Real Estate and Primary Industry lending – see Note (1).

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

0

200

400

600

800

1,000

Q3

'14

Q4

'14

Q1

'15

Q2

'15

Q3

'15

Q4

'15

Q1

'16

Q2

'16

Q3

'16

Q4

'16

Q1

'17

Q2

'17

Q3

'17

Total New Lending

YoY % Change

-20.0%

-18.0%

-16.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

0

5,000

10,000

15,000

20,000

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Q3

'14

Q4

'14

Q1

'15

Q2

'15

Q3

'15

Q4

'15

Q1

'16

Q2

'16

Q3

'16

Q4

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Q1

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Q2

'17

Q3

'17

Total Outstanding Debt

YoY % Change

New Lending to SME’s Outstanding Debt of SME’s

Indicators – Data sources

Indicators – Data sources


Indicator Source Frequency Seas adj.

Sentiment Indicators

1 Consumer Sentiment Index ESRI/KBC Monthly No

2 Purchasing Managers’ Index Investec Monthly Yes

Macroeconomic Indicators

3 Domestic Demand CSO National Accounts Quarterly Yes

4 Unemployment CSO Quarterly Yes

5 Disposable Income CSO Quarterly Yes

Sectoral Indicators

6 Earnings by Business Size CSO Quarterly Yes

7 Employment by sector (QNHS) CSO Quarterly No

8 Retail Sales Volume Index CSO Monthly Yes

9 Overseas Trips to Ireland CSO Quarterly Yes

10 Industrial Production Index CSO Monthly Yes

11 Services Index CSO Monthly Yes

12 Building and Construction Production Index CSO Quarterly Yes

13 Food Production Volume Index CSO Monthly Yes

Lending Indicators

14 Outstanding SME debt by sector Central Bank Quarterly No

15 New Lending to SMEs by sector Central Bank Quarterly No

Notes

(1) We exclude lending to financial intermediaries and real estate lending as these account for a significant proportion of SME lending (as defined) but a relatively small proportion of SME economic activity. In addition, we exclude the primary Sector (mainly Agriculture) from our analysis as the factors influencing that sector are arguably quite different to those affecting other SMEs. It should be noted that we have included lending to the Construction sector in our aggregate (unlike the Central Bank) as we believe that most of this lending is now for working capital in the construction sector and not for property purchase or development.

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BPFI SME Market Monitor Final Report · 2018-03-09 · BPFI SME Market Monitor Final Report 1 1...

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