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 2017 Survey Update

Issued 15th January 2018

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 accelerates to 33-mth high of 54.4• Global manufacturing output (55.6) quickens to 83-mth high• Growth accelerates in China, India & the EZ (notably Germany) • China & India composite PMIs at 53.0 – 12-mth & 14-mth highs• Emerging Markets PMI quickens to 53.0 – a 59-mth high• Developed Markets manufacturing PMI at 82-mth high (56.3) • EZ composite PMI quickens to 58.1 – highest since Feb-11• Germany composite (58.9) at highest since Apr-11 while

France (59.6) eases from November’s 78-mth high• Italian composite PMI quickens to a 10½-yr high of 56.5• Republic of Ireland composite rises to 60.2 – a 21-mth high• UK composite PMI remains unchanged at 54.7 • North West (60.7) & Wales (59.0) post the fastest rates of

growth in output in Dec & Scotland the weakest (49.4)

December 2017 Global PMIs – Key highlights

• Business activity accelerates to a 12-mth high of 56.9• New orders accelerate to 40-mth high of 57.2• Export orders accelerates to a 12-mth high of 57.6• 35th successive month of private sector employment growth• Private sector jobs growth accelerates to a 3-mth high (54.4)• Backlogs of work increased at their fastest rate since May 2014• All sectors reported faster rates of output growth in December• Retail was the fastest growing sector for the 4th month in a row• Manufacturing order books rising at their fastest rate in 39-mths• Retail the only sector not to record jobs growth (33-mth low) • Construction firms reported the fastest rate of job creation• All sectors saw inflationary pressures ease but still elevated• Service sector firms raising prices at their fastest rate in 22-mths

December 2017 Northern Ireland PMI – Key highlights

Global output growth at a 33-month high with manufacturing output growth at an 83-month high

The Eurozone & China show an improvement in December with the US easing & UK & Japan unchanged

Divergence between Developed Markets PMI growth rate and Emerging Markets narrowing

Emerging Markets’ growth rate boosted by China, Russia & more recently India. Brazil remains in contraction mode

Chinese services PMI hits a 40-month high pushing the composite index up to a 12-month high

France, Germany and the Republic of Ireland economies firing on all cylinders

Eurozone posts an acceleration in output growth across all sectors

Eurozone PMI suggests another strong quarter of EZ economic growth in Q4

Republic of Ireland, France & Northern Ireland post the fastest rates of service sector growth in Dec-17

Eurozone, US, Japan & China all report a marked acceleration in manufacturing activity in December

Developed Markets outperforming Emerging Markets

NI & RoI firms report a marked acceleration in output growth in December. UK’s growth rate unchanged

PMI more positive than Composite Index. Latter includes hefty falls in manufacturing output due to closure of JTI plant.

Output, orders & employment growth hit a 3-yr high in 2017. Exports in line with 2016’s 12-yr high

Growth rates for output, new orders & employment accelerated in Q4 relative to Q3. Export growth eases

NI firms report an acceleration in the pace of expansion in activity, new orders & employment

NI new orders growth accelerates. While UK & RoI firms report a stabilisation in orders growth

Backlogs of work within NI firms mounting at their fastest rate since May 2014

NI export orders growth accelerates to a 12-month high

NI’s rate of employment growth quickens and remains above the UK’s for fourth successive month

NI’s private sector firms remain in hiring mode in H2 2017 with PMI signalling an acceleration in jobs growth

Squeeze on profit margins continues in Q4

Regional Comparisons

North West & Wales top the regional growth table with Scotland (contracting) at the bottom

North West & Wales top the growth table for Q4 with South West & Scotland at the bottom

The West Midlands reported the fastest growth rate in 2017 with Scotland the slowest

NI’s pace of job creation remains above the UK average and 7 other regions

NI’s employment growth rate outperforming 7 UK regions in Q4

Scotland & the North East have reported the weakest rates of jobs growth over the last year. NI in line with UK

SectoralComparisons

UK manufacturing activity remains strong with services & construction posting more subdued rates of growth

PMI suggests a pick-up in UK economic growth in Q4

All RoI sectors report very strong rates of growth with construction & services firms posting a recent surge

Retail & construction sector experience the biggest improvement in activity in Q4 relative to Q3

Retail records the fastest rates of growth followed by services, then manufacturing & construction

Construction posts its strongest quarter for jobs growth so far. Pace of hiring slows for services

Inflationary pressures moderate for firms in construction & services. But intensify for retailers & manufacturers.

NI’s manufacturing firms reporting faster rates of growth in orders, output and employment

NI manufacturing output growth continues but at a much more subdued rate than in the UK and the RoI

NI manufacturing output growth (last 3 months) remains in line with pre-downturn long-term average

UK, RoI & NI firms all report an acceleration in new orders growth

A strong €uro is not having a negative impact on EZ manufacturing output with Italy, RoI & France booming

£ weakness exacerbated input cost inflation. NI/UK cost pressures easing but remain elevated

Input & output cost inflation hit record highs in Q1. But notable easing in Q2/Q3. Input cost pressures up in Q4

NI & RoI manufacturing firms report a pick-up in the pace of job creation but both lag behind the UK

NI’s services sector expansion remains robust though pace of job creation eases

Improvement in service sector output growth rates in Q4 for UK, NI and RoI firms

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

New orders growth rate eases for RoI & UK firms with NI’s service sector reporting a slight improvement

Input cost inflation eases slightly with output price inflation at a 22-mth high

NI service sector firms hiring at a robust rate but as with their UK equivalents the rate of growth is slowing

Retail sales & orders rising at a rapid rate but this increased demand isn’t translating into more jobs!

NI retailers report some moderation in input cost and output price rises

NI’s construction firms report faster rates of growth in new orders, output and employment

Input cost inflation remains high with firms increasing prices at a much weaker rate

NI firms report a pick up in output growth and at a faster rate than UK firms. Both continue to lag the RoI

NI & UK firms report an increase in new orders in Q4

UK construction growth is reliant on housebuilding

Construction sector still reporting a shortage of sub-contractors with rates charged rising

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

All sectors of RoI construction activity report an acceleration in growth in December

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

RoI construction firms still remain very optimistic about 2018 & well above the long-term average

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