Ulster Bank Northern Ireland Purchasing Managers Index (PMI)

Includes analysis of Global, Eurozone, UK, UK Regions, NI & Republic of Ireland economic performance by sector

June 2016 Survey Update Issued 11th July 2016

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 remains subdued in June with manufacturing activity rising from May’s 42-month low

China, Japan and the UK report a deterioration in their composite PMIs in June

Developed Markets’ PMI stuck in low growth mode while Emerging Markets stagnates

Emerging Markets’ PMI continues to stagnate with Brazil in recession. Russian PMI hits a 40-month high

Chinese manufacturing & services PMIs diverge

Services & manufacturing in low growth mode ‘Down Under’

Spain & Italy report an acceleration in business activity with France back in contraction territory

EZ manufacturing output growth quickens in June but services growth slows with retail & construction in decline

GDP picked up in Q1-16 but composite PMI signals that the Eurozone economy is stuck in a low gear in Q2

The RoI continues to post the fastest rate of output growth in services with Brazil contracting at a rapid rate

Manufacturing PMIs for the EZ and the US (ISM) improve in June while Japan & China in contraction mode

Developed Markets still outperform Emerging Markets. The latter is below 50 for 14th time in 15 months

New Zealand**, Denmark & Austria record the fastest rates of manufacturing growth. BRICS still struggling

UK firms report weakest rate of growth since Mar-13 with NI faring slightly better & RoI in robust growth mode

PMI suggests private sector growth stabilises in Q4-15, accelerates in Q1 2016 but eases in Q2

2014 was the 1st year in 7 years that the 4 main indicators recorded expansion, repeated in 2015 but growth slowed

Output, orders & jobs growth eases in Q2 relative to Q1 with only exports growth increasing albeit marginally

NI firms reported an improvement in business conditions in June albeit from subdued levels for output & orders

RoI firms are still reporting strong growth in new orders while NI & UK firms post a marked slowdown in Q2

RoI firms still reporting rising backlogs while their UK & NI counterparts post declines

NI export orders fall for the first time in five months

RoI jobs growth slows but still robust rate while UK hiring slowdown continues with NI posting a pick-up in June

Input cost inflation accelerating at a faster rate than output prices with implications for profitability

Regional Comparisons

The North West tops the regional growth table with London recording its weakest reading since April 2009

The East Midlands reported the strongest rates of growth in Q2 with London, Scotland & the North East the weakest

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

Northern Ireland recorded the strongest rate of job creation within the UK in June

Yorkshire & Humberside, Scotland & the North East report job losses in Q2 with NI outperforming most of its peers

Scotland & the North East post job losses over the last year with NI below the UK average

SectoralComparisons

Manufacturing output growth rebounds as services slows and construction signals a marked contraction

The UK’s growth rate slowed in Q1 to 0.4% and is expected to slow further in Q2 based on PMI

Services was the only sector in the RoI to report a slowdown in activity in June with a pick-up in activity elsewhere

NI manufacturing was the only sector to report faster rates of growth in Q2 relative to Q1

Services sector output growth slowing fast with construction contracting & manufacturing improving

Rate of jobs growth eases within services & construction while recent phase of manufacturing job losses has passed

NI’s manufacturing firms report a reversal of fortunes following a period of contraction

NI manufacturing output returns to low-growth mode alongside the UK

NI manufacturing output emerges from contraction but remains well below its pre-downturn long-term average

NI & UK firms report a sharp pick-up in new orders growth with RoI reporting a marked slowdown

Manufacturing output contracts for France with growth accelerating elsewhere

Higher wage costs (NLW introduced) & import costs push input cost inflation to a 23-month high

Slowdown in global manufacturing has been hitting employment most notably within the UK & NI

NI services sector experiences a slowdown across all key indicators in Q2

NI’s services sector reports a notable slowdown in output growth but still outperforms the UK

The rate of growth in NI’s services sector falls back below its pre-downturn long-term average in Q2

NI firms report an easing in new orders growth after recent high as growth slows markedly amongst UK firms

Input cost inflation picks up with output price rises continuing albeit at a notably weaker rate

NI & UK firms report an easing in the rate of service sector jobs growth with RoI’s growth rate broadly maintained

NI retailers are still reporting strong rates of jobs growth but sharp slowdown in sales growth and orders falling

Input cost inflation for NI retailers hits a 33 month high with output prices rising for the first time in 10 months

NI’s construction firms in contraction mode with employment growth broadly flat

Input cost inflation remains steady with pricing power being eroded

Output growth for RoI firms eases with a more significant slowdown for UK firms & contraction amongst NI firms

NI firms post a marked contraction in new orders with a rapid slowdown within UK & continued growth within RoI

UK firms report a sharp fall in housing & commercial activity in June with civil engineering broadly flat

UK sub-contractors remain in short-supply with rates charged still rising albeit at slower rates than in 2015

Optimism amongst UK construction firms has been falling lately and is below its long-term average

All aspects of RoI construction activity have reported a marked acceleration in their growth rates

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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