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 2017 Survey Update Issued 10th September 2018 Richard Ramsey Chief Economist Northern Ireland www.ulstereconomix.com richard.ramsey@ulsterbankcm.com Twitter @UB_Economics

< 50.0 = Contraction 50.0 = No Change > 50.0 = Expansion 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.

August 2018 Global PMIs – Key highlights Global output growth slows to 5-mth low (53.4) with manufacturing activity improving marginally from July’s 22-mth low Growth slows in China, India, Brazil (contracting) & the US China manufacturing & services PMIs slip to 14-mth & 10-mth lows Global manufacturing export orders remain at a 2-yr low of 50.3 Emerging Markets PMI falls to a 10-month low of 51.8. Developed Markets PMI slows to a 5-mth low of 54.0 EZ composite PMI rises from 54.3 to 54.5 with improvements for Germany, France & Spain. But Italian PMI slows to a 22-mth low with its manufacturing PMI contracting for the first time in 44mths RoI composite PMI rises from 56.9 to 57.5 UK composite PMI rises from 53.7 (July) to 54.1 driven by services Yorkshire & Humber and the East of England posted the fastest rates of growth in output with the North East flirting with stagnation The South East saw output growth slow to a 25-mth low

August 2018 Northern Ireland PMI – Key highlights Business & new orders growth slow to 4-mth lows of 53.9 & 53.1. NI firms saw the sharpest slowdown of all UK regions in August Jobs growth accelerates from July’s 12-mth low of 51.5 to 52.1 Input cost inflation eased to a 5-month low but remains elevated NI inflationary pressures are the most marked of any UK region Export orders growth continued but eased to a 10-mth low (52.3) Backlogs of work fell for the first time in 14 months All sectors bar manufacturing saw slower rates of output growth Retailers posted the most significant slowdown of all sectors Manufacturing saw growth in output, orders & jobs accelerate All sectors bar retail saw input cost inflation ease Retailers saw input cost inflation accelerate to an 18-mth high Services firms continue to raise prices at fastest rate in a decade Construction firms expect activity to fall over the next 12 months

Global output growth slows due to services (5-mth low) with manufacturing output just above July’s 22-month low

Slower rates of growth evident with US & Chinese PMIs while EZ, UK & Japan report faster rates of growth

Developed & Emerging Markets PMIs slow to 4-month and 10-month lows respectively

Emerging Markets’ PMI hits 10-mth low driven by China, India and Brazil (contracting again)

Chinese manufacturing and services PMIs hit 14-month and 10-month lows respectively

Italy is the only one of the Eurozone’s four largest economies not to post faster rates of growth in August

Eurozone sees some softening in manufacturing activity with construction output at a 21-month low

EZ PMI suggested a more notable slowdown in Q2 GDP growth than occurred. Q3* sees a slight easing

The Republic of Ireland, France & the US post the fastest rates of services growth in August

Chinese and Eurozone manufacturing PMIs ease in August while US ISM accelerates to a 14+yr high

Developed & Emerging Markets’ Manufacturing PMIs slip to 14-month lows

NI’s private sector reports a slowdown in activity with the pace of growth broadly in line with the UK

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

Output growth running at a 4-yr high year-to-date 2018 with pace of new orders & jobs growth easing

Business activity and new orders growth accelerating but pace of jobs and export orders growth is slowing

NI firms report a pick-up in the pace of job creation but a slowdown in business activity and new orders growth

NI, UK & RoI firms post a slowdown in new orders growth

NI firms report an easing in backlogs of work with a decline in August

NI firms report the weakest growth rate in export orders in 10 months

NI & UK employment growth accelerates in August but the pace of job creation still lags behind the RoI

NI’s firms in hiring mode in H1 2018 though pace of job creation has been slowing in H2

Squeeze on profit margins continues

Regional Comparisons

NI goes from the fastest growing UK region in July to one of the slowest in August

East Midlands & the East of England top the growth table for 3-months to August with NI ranked 4th

The East Midlands posts the fastest rates of growth over the last year with the North East the slowest

NI’s private sector the least optimistic within the UK after the North East of England

NI’s pace of job creation below the UK average

During the three months to August NI’s employment growth rate was in line with the UK average

The East of England & West Midlands top the table for jobs growth with the South East & North East at the bottom

Sectoral Comparisons

UK construction & manufacturing output growth slows while services posts faster rates of expansion

UK PMI suggests Q3 GDP growth of around 0.4% q/q

All sectors of the RoI economy continue to report strong rates of growth in August

Acceleration in NI private sector output growth in Q3 Acceleration in NI private sector output growth in Q3* evident in construction, manufacturing & retail

NI construction & manufacturing firms report a pick-up in output growth during the three months to August

Pace of hiring quickens eases within construction & services sector but accelerates amongst manufacturers

All sectors report an easing in input cost inflationary pressures

Retail remains the only sector reporting a notable easing in output price inflationary pressures

NI’s manufacturers reporting strong rates of output & new orders growth with hiring picking up too

Manufacturing output growth accelerates amongst NI & RoI firms but UK manufacturers report a slowdown

NI manufacturing output growth (last 3 months) still remains above its pre-downturn long-term average

New orders growth slows for UK manufacturers while NI & RoI firms in particular report faster growth rates

NI’s manufacturing PMI performing well against its European peers NI’s manufacturing PMI performing well against its European peers. Italian PMI hits a 44-mth low

Manufacturing inflationary pressures easing again

Squeeze on manufacturing profit margins continues though some easing in inflationary pressures

Pace of job creation picking up for both NI & RoI manufacturing firms

NI’s services sector reports a deterioration in business conditions in August

Service sector rebound in output growth evident in UK firms but pace of growth eases for NI firms

NI’s services sector in growth mode but pace of expansion is still below its pre-downturn average

New orders growth picks up significantly within NI service sector firms but still lags behind the RoI

Input cost inflation remains intense with service sector firms raising prices at an increasing rate

Pace of hiring accelerates amongst RoI firms but slows for NI services firms & remains subdued in UK

Retail sales activity eases following the weather related boost in June & July

NI retailers experience another acceleration in inflationary pressures

NI’s construction firms report a pick up in business conditions in the three months to August

Inflationary pressures remain intense amongst NI construction firms

UK & NI firms report a pick-up in construction output in the three months to August but still lag the RoI

UK & NI firms report an acceleration in new orders growth but the pace of expansion is well below that of the RoI

Slowdown in UK construction activity evident across all sub-sectors with civil engineering activity contracting

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

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

RoI commercial & housing activity continues to expand at robust rates with engineering activity picking up too

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

RoI construction firms very optimistic about the next 12 months & still well above the long-term average

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