Sustaining Competitiveness: West Midlands Industrial Productivity Rob Dobson / The Belfry / 6 July 2012 The Science of Finance

\ 2 \ 2 WMEF – Sustaining Competitiveness Agenda –Introduction to the West Midlands PMI –Sustaining competitiveness: Why is labour productivity important? –Productivity PMI – Performance at the EU level –West Midlands PMI: Output and Employment –West Midlands Industrial Productivity: The Productivity PMI

\ 3 \ 3 WMEF – Sustaining Competitiveness Introduction to Markit PMIs –Business surveys of over 20,000 companies worldwide –Timely, accurate, high-frequency monthly economic indicators –Released in advance of comparable official economic data –Cover the largest world economies and key emerging markets –Cover wide range of variables (including output and employment) –Internationally consistent methodology –Aggregate to global level or breakdown to national region –Used by all major central banks and financial institutions

\ 4 \ 4 PMI: World Map  Markit  Markit (under development)  Independent (included in Global PMI)

\ 5 \ 5 WMEF – Sustaining Competitiveness West Midlands PMI

\ 6 \ 6 WMEF – Sustaining Competitiveness Sustaining Competitiveness – global and national 1)Exchange ratePricing mechanism between currency areas –affects both imported input costs and overseas selling prices –directly impacts on international competitiveness – high frequency data available from spot and future exchange rates 2)Cost efficiency –Capital and commodity prices available in “real time” –But no real high frequency benchmark of efficient labour utilisation –Labour cost efficiency – the missing piece in the puzzle

\ 7 \ 7 WMEF – Sustaining Competitiveness Why is labour productivity important? Micro – company level –Cost control –Competition: productivity advantage offsets higher labour cost when competing against lower labour cost producers or nations Macro – economy level –Government policy –Inflation –Interest rates –Investment –Wealth creation

\ 8 \ 8 WMEF – Sustaining Competitiveness Raising the question......how can we obtain an accurate, timely and internationally comparable measure of West Midlands industrial productivity?

\ 9 \ 9 WMEF – Sustaining Competitiveness Productivity formula Productivity = Economic Output Employment

\ 10 \ WMEF – Sustaining Competitiveness Productivity PMI: Performance Evidence from the Eurozone Productivity PMI

\ 11 \ WMEF – Sustaining Competitiveness West Midlands PMI: Output Output: WMids vs UK, Global......and relative to other UK regions

\ 12 \ WMEF – Sustaining Competitiveness West Midlands PMI: Employment Output: WMids vs UK, Global......and relative to other UK regions

\ 13 \ WMEF – Sustaining Competitiveness West Midlands Industrial Productivity West Midlands vs UKCompared to other UK regions

\ 14 \ WMEF – Sustaining Competitiveness West Midlands Industrial Productivity Developed CompetitorsEmerging Market Competitors

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