Thursday, October 3, 2013

3/10/2013: Services PMI: September 2013


Markit and Investec released Services PMI survey press release for Ireland. As usual - the note is full of statements that can not be confirmed by information contained in the note itself.

On the side that can be reported/interpreted:

  • PMI slipped from what appeared to be an unlikely jump to 61.6 in August to slightly lower, yet still strongly-expansionary 56.8. This is still a robust rate of growth. 
  • I cannot tell if it was driven by a handful of MNCs or was broadly-based. Allegedly, the UK was the main source of strength for new exports orders, which are expanding, seemingly (reading the Markit release) at a more modest pace than headline PMI indicates. The UK receives huge volume of exports from Ireland on ICT services side (the likes of Google et al) and this is the major point of contention the UK Government has with Irish tax structures, so it might be that much of the services exports 'boost' comes from transfer pricing.

  • Dynamics are good: there is new upward sub-trend established since September 2012 and this breaks the period of flat trend between September 2010 and September 2012. 
  • Significantly, since around September 2012 the series have been - on average - in the statistically-significant zone of expansion (again, distinct from September 2010-September 2012 period when expansions on average were not statistically significant).


  • On quarterly averages basis: Q1 2013 came in at 53.7, Q2 at 54.3 and Q3 came in at 58.7. Sounds impressive, however, if we account for the freakishly high reading in August (partially and imperfectly controlling for weather effects) the Q3 average sits within 55-56 range. Thus even with weather effects taken out, the overall Q3 result is strong.
  • On annual basis, using quarterly averages: Q3 2010 stood at 52.5, Q3 2011 at 51.4, Q3 2012 at 51.6 and the current running average is well ahead of all of these, even if we take adjustment for unusually good weather.
Overall: good numbers. However, we have no tangible information as to the movements on profit margins, employment, export orders, new orders etc. You should read this note on some caution regarding interpreting PMI for Services for Ireland: http://trueeconomics.blogspot.ie/2013/09/592013-cautionary-note-on-irish.html. Combined analysis of Manufacturing and Services PMIs to follow shortly.


Note: To add to this, I have now been seemingly removed from the mailing list for the slightly more detailed version of release (or Investec stopped supplying one altogether). 
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