Showing posts with label Irish PMI. Show all posts
Showing posts with label Irish PMI. Show all posts

Monday, March 9, 2020

9/3/20: Irish February PMIs: Baseline for the Covid2019 Impact


With the start of March and with corona virus impacting the global economy, I have decided to restart coverage of Irish PMIs - something I did not do for some years now. So here are some of the 1Q 2020 results based on January-February data.

First off, Sector and Composite PMIs on a quarterly average basis. As reminder, Composite PMIs are computed by me based on Markit and CSO data as GDP share-weighted averages for each sub-component, namely Manufacturing, Services and Construction:

Services clearly lead the recovery from 4Q 2020 weakness, with both Manufacturing and Construction nominally in the expansion territory, but statistically too close to zero growth to be congratulatory.


Composite PMIs ex-Construction are statistically within long term average and consistent with subdued growth rates. Composite ex-Construction (based on just Manufacturing and Services) is at 52.86 against the upper bound for the 95% confidence interval around the historical mean of 52.74. Including Construction, the Composite PMI rises to 56.14.

Monthly PMIs against period averages:


None of this data reflects any major concerns with COVID2019, since no cases have been identified in Ireland in the period covered by data. The impact should be felt in March 2020 figures due at the start of April. So we can look at the above charts as the base for the upcoming COVID2019 impact.

Wednesday, January 6, 2016

6/1/16: Irish Manufacturing, Services & Construction PMIs: 4Q 2015


Time to update Irish quarterly PMI readings for 4Q 2015. Please note: the following refer to average PMI readings per quarter as supplied by Markit.

Irish Manufacturing PMI averaged 53.7 in 4Q 2015, down slightly on 54.7 in 3Q 2015 and the lowest quarterly reading since 4Q 2013 (jointly tied for that honour with 1Q 2014). The quarterly average has now declined in every quarter since the period peak in 4Q 2014.  Still, at 53.7 we have rather solid growth signal as is. On y/y basis, Manufacturing PMI is now down 5.1% after falling 2.6% in 3Q 2015 and rising 0.7% in 2Q 2015. 4Q 2015 marks tenth consecutive quarter of above 50.0 readings for the sector, with all of these readings being statistically above 50.0 as well. The trend in growth is down.

Irish Services PMI slipped from 62.6 in 3Q 2015 to 61.8 in 4Q 2015, down 1.3% q/q after posting a 1.4% rise q/q in 3Q 2015. On annual basis, the PMI fell 0.11% having previously risen 0.91% in 3Q 2015 and falling 0.48% in 2Q 2015. This marks 20th consecutive quarter of above 50.0 readings in the sector. In level terms, 61.8 signals robust growth in the sector, so it is a positive signal, albeit over time consistent with quite a bit of volatility and no strongly defined trend.

Irish Construction sector PMI (through November 2015) for 4Q 2015 stood at 55.9, down from, 57.1 in 3Q 2015 and marking the second consecutive quarter of index declines. Q/Q index was down 7.95% in 3Q 2015 and it was also down 2.16% in 4Q 2015. Y/Y, index was up 1.42% in 2Q 2015, down 7.6% in 3Q 2015 and down 12.4% in 4Q 2015. Volatile movements in the series still indicate downward trend in growth in the sector.


Chart above summarises the sub-trends, with Services trending very sluggishly up, while Manufacturing and Construction trending down.

As shown in the chart above, my estimated Composite measure, relating to PMIs (using sectoral weights in quarterly GDP figures) posted moderation in growth rate in 4Q 2015.  Composite Index including construction sector stood at 54.4 in 4Q 2015, down from 55.5 in 3Q 2015, hitting the lowest reading since 3Q 2013. This marks second consecutive quarter of declining Composite Index. Index is now down 1.9% q/q having previously fallen 3.8% q/q in 3Q 2015. In y/y terms, Composite Index was up 0.8% y/y in 2Q 2015, down 3.5% y/y in 3Q 2015 and down 6.52% y/y in 4Q 2015. While levels of Index suggest relatively robust growth in the economy across three key sectors, there is a downward trend in the growth rate over time.

So in the nutshell, Irish PMIs continue to signal robust growth, albeit the rate of growth appears to be slowing down along the new sub-trend present from 1Q 2015 on.


Two charts to highlight relationship between PMI signals and GDP and GNP growth rates (data through 3Q 2015).




Tuesday, August 4, 2015

4/8/15: Irish Manufacturing PMI: July 2015


Irish Manufacturing PMI released by Markit showed accelerated growth in the sector in July, with activity growth signal rising from 54.6 in June to 56.7 in July. This marks 26ht consecutive month of index readings above 50.0 (23rd consecutive month of readings statistically significantly above 50.0).


Overall, the trend remains for high growth in the sector, albeit the rate of increase in growth (second derivative) is moderating (turning negative) since around February 2015.


It is worth noting that the moderating trend in PMIs is confirmed by the most recent QNA datum showing Industry sector - excluding Building and Construction - in a q/q decline in 1Q 2015 of 0.31%, while the sector posted a 9.63% growth year-on-year.

Overall, another month of gains in Manufacturing is a good sign of underlying strength in the sector.

Friday, July 10, 2015

10/7/15: Irish Quarterly PMIs: Manufacturing, Services & Construction


Irish PMI for June, released earlier this month by Markit (co-branded by Investec) give us a chance to look at quarterly activity. Given volatility in both Manufacturing and Services activity in the monthly data, this provides a slightly better potential insight into what is going on in the economy (see caveat at the bottom of the post).

Q2 2015 average PMI for Manufacturing sector reads 55.8 - the lowest for any quarter since Q2 2014, but still solidly in an expansion range. Q2 2015 marks second consecutive quarter of declining manufacturing PMI readings. However, on a positive side, Q2 2015 was the 8th consecutive quarter of readings above 50. Year on year, growth in the sector remained largely unchanged and growth de-accelerated on a quarterly basis.

Q2 2015 average PMI for Services rose marginally to 61.8 from 61.6 in 1Q 2015 and is below 62.1 average for Q2 2014. Q2 2015 marks 18th consecutive quarterly reading above 50 for the Services sector. Year on year, growth slowed down in the Services sector and quarter on quarter it remained largely static.

Construction sector PMI (co-branded with Ulster Bank) posted quarterly average of 60.3 in Q2 2015, well above 54.0 average for Q1 2015, but below 61.2 average for Q2 2014. Thus, year on year growth fell in the Construction sector, but there was a significant acceleration in quarter on quarter growth. Q2 2015 marks 8th consecutive quarter with average PMI above 50.0.


Composite PMI (subject to future revisions due to sectoral weights changes once we have Q1 and Q2 national accounts) posted a reading of 60.4 in Q2 2015, up on 59.0 in Q1 2015 and marginally higher than 60.2 reading in Q2 2014. Year on year, composite PMI signalled basically static performance, while quarterly growth improved somewhat in Q2 2015.


Caveat: Irish PMI readings have very low direct correlation to actual growth in the economy, measured by either GDP or GNP. Historically, PMIs levels and changes explain at most ca 10.6 percent of variations in GNP and at most 8.8 percent of variations in GDP. In other words, booming PMIs, on average, do not translate into booming economy. 

Wednesday, June 3, 2015

3/6/15: Irish Manufacturing PMI: May 2015


Irish Manufacturing PMI for May came in at a stronger 57.1 reading up on 55.8 in April. The indicator currently stands above 12 mo average (56.3) and 3mo average (56.6). 3mo average through May is marginally up on 3mo average through February 2015 (56.5).


Looking at shorter run shows that current levels of activity are consistent with flattening out of the trend at high levels at the trend level of 56.5-57.0:


Overall, good solid reading for Manufacturing, subject to all usual caveats relating to questionable MNCs activities and data bias in favour of MNCs.

Wednesday, May 6, 2015

6/5/15: Irish Services & Manufacturing PMI: April 2015


Irish Services PMI (Markit & Investec) for April posted slightly lower rate of growth in the sector compared to March, declining marginally to 60.9 from 60.6 a month ago. Current reading marks the 14th consecutive month of Services PMI above 60.0 and 33rd consecutive above 50.0 reading, so not surprisingly, the sector is running hot.

Irish Manufacturing PMI is covered in more details here: http://trueeconomics.blogspot.ie/2015/05/1515-irish-manufacturing-pmi-april-2015.html


Stripping out some volatility:

  • Services sector PMI 3mo average is currently at 62.2, running above 3mo average through January 2015 (61.0) and 3mo average through April 2014 (60.0). 6mo average through April 2015 is just 0.4 points below 6mo average through October 2014.  Historically, current Services PMI 12 mo average of 61.8 compares favourably to the post-crisis period average of 56.0 and pre-crisis average of 57.6. Crisis period average was 50.7.
  • Manufacturing sector PMI 3mo average through April 2015 is at 56.1 which is somewhat lower than the 3mo average through January 2015 (56.7) but well ahead of the 3mo average through April 2014 (54.8). 6mo average for the period through April 2015 is 0.5 points above the 6mo average through October 2014. Historically, current Manufacturing PMI 12 mo average of 56.1 compares favourably to the post-crisis period average of 52.7 and pre-crisis average of 51.8. Crisis period average was 51.2.


In April, both Services and Manufacturing PMIs posted some marginal slowdown in activity compared to April 2014. Services PMI slipped from 61.9 to 60.6 and Manufacturing PMI declined from 56.1 to 55.8. Nonetheless, both series have now been jointly trending above 50.0 for 23 months, which is a solid performance.


Friday, May 1, 2015

1/5/15: Irish Manufacturing PMI: April 2015


Irish Manufacturing PMI is out today for April (compiled by Markit, sponsored by Investec), posting another strong reading at 55.8,


As the chart above indicates, current 12mo average is at robust 56.1 and 3mo average is 56.7. In 3mo through January 2015, the indicator averaged 56.1, which suggests the latest 3mo performance was stronger then the previous one. 3mo average through April 2015 is well ahead of the same period average for 2014 (54.8) and 2013 (49.4). Overall, these are strong numbers, although much of the spectacular growth is probably accounted for by the fabled Contract Manufacturing schemes that are used by some MNCs to book value added for production taking else where into Ireland for tax purposes.

April reading continues the period - 20 months and counting - of continued readings that are statistically significantly above 50.0. However, momentum growth is weakening and remains static from around August 2014. Still, this is the second order derivative, with the overall rate of growth being signalled by the PMI remaining robust.


Tuesday, April 7, 2015

7/4/15: Irish Services PMI: March 2015


Irish Services PMI was published by Markit/Investec today.

March Services PMI stood at 60.9, down from 61.4 in February, marking the third consecutive month of m/m declines from the local high of 62.6 in December 2014. Current reading is the lowest in 12 consecutive months.

Still at 60.9, the index is signaling robust growth in the sector. More importantly, 3mo average is at 61.6 for Q1 2015, which is marginally weaker than 61.9 average for Q4 2014 and well above Q1 2013 reading of 54.2 and Q1 2014 reading of 59.9.


March marks the first time since January when both Manufacturing and Services PMIs declined. Last time this happened before January 2015 was in May 2014, so twin decline is a rather rare event. This said, both indices remained well above their post-crisis averages in March, although over the last 12 months, Manufacturing averaged 56.2 (which means March reading out-performed the average at 56.8) against Services 12 mo average of 61.9 (which means that March reading under-performed the average at 60.9).

Broadly-speaking, we are seeing reduction in the rate of growth in both Manufacturing and Services, albeit from very high levels.

More detailed quarterly analysis to follow, so stay tuned.

Wednesday, April 1, 2015

1/4/15: Irish Manufacturing PMI: March 2015


Markit/Investec Manufacturing PMI for Ireland came out today showing continued and robust growth in the sector (or in the sub-sample of the sector covered by the survey).

Per Markit: "The Irish manufacturing sector registered a further strong improvement in operating conditions during March, helped by a series-record rise in employment. Job creation was linked to a further sharp increase in output requirements amid strong new order growth. The recent weakness of the euro against both the US dollar and sterling led to a first increase in input prices in three months."

Balmy conditions in the sector have meant that the PMI slipped somewhat from the scorching hot reading of 57.5 in February to a hot and humid 56.8 in March. Trend is flattening out, as expected, given the already surreal readings and the fact that the index has been over 50.0 for 22 consecutive months and within statistically significant difference from 50.0 for 19 months straight.



Aside from the above, anecdotal evidence - from one of the larger trade bodies - suggests that externally trading SMEs are now showing serious uptick in their exporting activity due to improved exchange rate environment.

Cited by Markit employment outlook strength is confirmed by today's Live Register data for February 2015 which shows:

  1. Significant declines in Live Register y/y
  2. Broad declines in Live Register across duration of registrations (long- and short-term supports); and
  3. Broad declines in Live Register by occupation, with all occupations posting decreases in LR.
So on the net - good news.

Saturday, March 7, 2015

7/3/15: Irish Services Sector Activity & PMI: January 2015


Irish Services Activity Index for January came out yesterday, offering some interesting data reading.

Contextually: Services PMI has averaged 62.2 in the 3 months through February 2015 and it averaged 61.9 for the period of 3 months through November 2014 - both showing blistering growth in the sector.

Now, January Services Activity Index came in 12.6% ahead of the same level in January 2014. 2 mo average through January (comparative to PMI averages we have) is 119.6 which is 9.44% ahead of 3mo average through the same period of 2014. This is rapid growth and it accelerated in December-January as chart below shows.



The acceleration was broadly-based:

  • Information and Communication sub-sector activity rose 21.2% y/y with a massive 10.2% jump in m/m terms in January alone. The sub-sector growth rate is around 8.11% y/y in terms of 3mo average through January.
  • Professional, Scientific and Technical sub-sector activity posted a big 14.0% jump y/y in January and was up 11.8% m/m. 3mo average through January was up 13.1% y/y.
  • Wholesale and Retail Trade etc sub-sector activity rose 8.8% y/y and 9.5% m/m - also strong growth, although 3mo average through January was up weaker 7.2% y/y.
  • Transportation and Storage sub-sector activity rose 8.4% y/y but was down 1% m/m, having previously posted rapid growth in November and December. 3mo average through January 2015 is up 16.5% y/y.
  • Accommodation and Food services activity was up 14% y/y and down 0.33% m/m in January, with 3mo average through January 2015 standing 13.9% above 3mo average through January 2014.
  • Administrative and Support services activity rose only 2.9% y/y and was down 0.8% m/m, with 3mo through January 2015 up just 2.1% y/y.


So, in summary - January figures show a very surprising (and thus suspicious) jump in overall activity across a number of sectors. CSO provides no explanation as to this jump nor any warnings on it. My suspicion is that we are seeing the effects of the infamous 'knowledge development box' introduction in Budget 2015 with MNCs pushing forward more aggressive tax optimisation strategies through it, whilst maintaining previous tax arrangements. I will post a small note on this later, so stay tuned.


Now, an update of the validity of PMIs as a measure of Services Activity recorded in the sector. Table below shows correlations between Services Activity Indices and Services PMIs



As the table shows, there is very little relationship between Services PMIs performance (I also did same analysis for rates of change in the indices that show even worse performance for PMIs as indicators of current or future actual activity) and actual Services sector activity. Out of 84 correlations, 53 are either negative of statistically zero and only 13 have strong positive correlation with either levels of activity or growth in activity. Crucially, PMIs perform stronger (relatively speaking) in correlations with levels of activity, rather than growth rates in activity (in which they perform absolutely disastrously across all time horizons and lags). About the only areas where PMIs are useful in relating to the level of activity (but not growth in activity) are: strongly with ICT, weakly with Admin & Support services and overall Services. Which suggests strong bias in PMIs toward MNCs-dominated ICT services sub-sector. Another miserable point for PMIs: they are more indicative of contemporaneous activity than providing insight into future activity.

Monday, February 2, 2015

2/2/15: Irish Manufacturing PMI: January 2015


Markit/Investec Irish Manufacturing PMI is out for January, posting 55.1, down on 56.9 in December and the lowest reading in any month since May 2014. Still, 55.1 is a strong performance.

3mo MA is now at 56.1 which is slightly worse than 56.5 3mo reading through October 2014, but is ahead of 55.7 average for 12 months through January 2015.

The growth rate is slowing down, but the activity remains robust:



Wednesday, December 3, 2014

3/12/2014: Irish Services PMI: November


Strong Services PMI performance for Ireland in November with Markit/Investec PMI index for the sector rising to 61.6 from already boiling-high of 61.5 in October. This marks ninth (!) consecutive month of readings above 60.0 (not just 50.0) and the 12mo MA through November is currently running at a massive 61.4.

Shorter-term dynamics are very positive: 3mo MA through November is at 61.9 and this is only marginally lower than 3mo MA through August 2014 at 62.1. The numbers are simply surreally good.


The trend is very similar in Manufacturing (see chart below and note here: http://trueeconomics.blogspot.ie/2014/12/1122014-irish-manufacturing-pmi.html).


Without knowing actual details on disaggregation of the total indices, it is hard to say what is going up and at what rate. Furthermore, again due to Markit/Investec refusal to publish actual data details, I have no idea which sectors are rowing what in both services and manufacturing. My suspicion is that we are seeing continued boom in MNCs-dominated sectors, driven in part even higher by the changes in the MNCs-based operations in Ireland away from profit shifting to either profit booking and/or cost centres. In other words, instead of shifting profits via Ireland to offshore locations, many MNCs are starting to book costs into Ireland or park profits here. All of these activities are net positive for GDP and GNP, albeit of dubious benefit to those of us living here.

Monday, December 1, 2014

1/12/2014: Irish Manufacturing PMI: November 2014


Markit and Investec Manufacturing PMI for Ireland for November came in with some pretty good numbers.

Overall index reading came in at 56.2 a slowdown from 56.6 in October, but ahead of 55.7 in September and the second highest reading in recent years, fourth highest over the last 10 years. Given October performance, some moderation was expected and November reading surprised to the higher side of this.


Current 12mo average is at blistering 55.2 with latest 3mo average at 56.2 slightly ahead of 56.0 for the 3mo average through August 2014.


As chart above shows, series break-away into positive trend that started around Q2 2013 continues, albeit with some flattening in the series from around the end of Q1 2014. All together - good news, albeit with usual caveats on the weak links between final actual economic growth and PMIs in general.

Full release here: http://www.markiteconomics.com/Survey/PressRelease.mvc/b94c35358ea64a0692bbd791519e2cac

Thursday, June 5, 2014

5/6/2014: Irish Composite Activity indicator for Services & Manufacturing: May 2014

In the previous post, I covered Irish manufacturing and services PMIs on monthly frequency basis. Here, an update on quarterly (Q2 to-date) and composite series.


As chart above shows:

  • Manufacturing PMI rose to 55.6 Q2 (to-date) against 53.7 in Q1 2014 and 49.3 in Q2 2013. These are solid gains. Still, some lingering doubts as to just how much growth can be read off this result. Q1 2014 reading was bang-on in-line with Q4 2013 (53.6) and as we know, Q4 2013 was a quarter of falling GDP.
  • Services PMI rose to 61.8 in Q2 2014 (to-date) against 59.9 in Q1 2014 and 54.3 in Q2 2013. Again, solid gains.
  • Composite PMI (this is not supplied by the Markit/Investec, but is computed by myself based on their data for Manufacturing and Services) rose to 60.3 in Q2 2014 (to-date) up on Q1 2014 reading of 58.4 and Q2 2013 reading of 52.8 (note: including Construction into Composite PMI generates virtually identical result).
Key takeaways:

  1. Solid performance on Composite PMI reading. Q2 2014 to-date shows strongest growth since Q2 2006
  2. Q1 2014 and Q4 2013 both showed strongest growth signals since Q1 2007.
  3. Thus, by all readings in the last three quarters, Irish economy should be expanding in Q1 2014 and this expansion should have accelerated in Q2 2014.

Thursday, May 8, 2014

8/5/2014: Irish Composite Activity indicator for Services & Manufacturing: April 2014


In the previous post I covered Irish Manufacturing and Services PMIs as released by the Investec/Markit. With both PMI indices out, time to update my own Irish Composite Activity Indicator (CAI) based on PMIs and showing a measure of aggregate economy-wide activity in private sector.

The CAI is based on quarterly (or closest 3mo average) readings for two PMIs.

Chart below illustrates the series.


Q2 2014 reading to-date is for CAI of 58.8 which is slightly up on Q1 2014 reading of 58.4 and is up 11.3% y/y. With Q1 2014 up q/q by 0.36% and Q2 (to-date) reading up 0.62% q/q, the pace of expansion is rising.

So far, in Q2 2014 we are marking 17th consecutive quarter of expansion in economic activity. Which, of course, stands contrasted by the fact that GDP posted 8 quarters of q/q declines over the last 16 quarters for which we have data, while GNP posted 7 quarters of contractions.

Basic point is the old one: PMIs have virtually no connection to either GDP or GNP.

Still, good feeling is worth something (which is why we are willing to pay to see soft-ball comedy and entertainment) and on this measure, CAI shines some warmish light on us all... 

Thursday, April 10, 2014

10/4/2014: Irish Composite Activity Indicator (CAI) based on PMIs: Q1 2014


Based on monthly PMI data, here is the blog-exclusive quarterly Composite PMI series. These take quarterly averages for Manufacturing and Services PMIs for Ireland (compiled by Markit and published by Investec Ireland) and weighting them up on the basis of quarterly weights of each sector in the Private Sector contributions to GDP (based on CSO National Accounts Data).

Here is the chart showing both PMIs and the composite index compiled by myself. 



So on a quarterly averages basis:
  • Manufacturing PMI rose 0.25% q/q having previously been up 1.70% in Q4 2013. Year on year, Q1 2014 PMI came at 10.45% above Q1 2013 and this marks an improvement on 6.55% growth y/y recorded in Q4 2013. We are now into 3rd consecutive quarter of above 50.0 average performance.
  • Services PMI rose 0.39% q/q having previously been up 3.28% in Q4 2013. Year on year, Q1 2014 PMI came at 7.18% above Q1 2013 and this marks an improvement on 3.14% growth y/y recorded in Q4 2013. We are now into 3rd consecutive quarter of above 50.0 average performance.
  • Composite PMI reading is at 58.4 in Q1 2014 and this is 0.36% higher than in Q4 2013 and 10.16% higher than in Q1 2013. Q1 2014 marked 16th consecutive quarter of composite index reading above 50.0.

Monday, September 23, 2013

23/9/2013: Sunday Times 08/09/2013: Irish Demographic Dividend Reversal

This is an unedited version of my Sunday Times article from September 8, 2013.


Back in the heady days of the Celtic Tiger, Irish economics commentariat and banks experts were extolling the virtues of Ireland's 'demographic dividend'.  A confluence of high birth rates, declining mortality and robust inward migration was propelling Ireland toward perpetually rising population counts. With these, the argument went, Ireland faced the ever-lasting expansion of domestic demand and labour supply.

Less than a decade later, the dividend has all but vanished in the maelstrom of rampant emigration. More ominously, as the latest trends suggest emigration is now reaching well beyond the traditionally at-risk sub-categories of the recent newcomers to Ireland and the long-term unemployed. Instead, outflows of professionals and middle-class families are now also on the rise.


Cutting across this nirvana of consensus permeating the Irish society around 2004-2006, few dared to suggest that something major was amiss in the aforementioned theory. Yet, the risks to Ireland's 'demographic dividend' were visible even at the time of the boom. At the peak of the Celtic Tiger and since the beginning of the Great Recession, I wrote about them in Irish media, including in these very pages. The first threat to our long-term population trends even in 2004-2006 period related to the risk of a structural economic slowdown. The second one came from the demographic ageing of the core European states and the resulting inevitable rise in wages premium for younger workers in these economies.

With the onset of the Great Recession, increased job markets uncertainty and declining disposable incomes have acted to boost Ireland’s birth rates, seemingly supporting the argument of some analysts that the demographic dividend was still alive and well then. In 1995-2007, there were 56,423 annual births on average in the Republic. In 2008-2009 average annual number of births stood at 74,183. Changes in the incentives for having children offered by the Great Recession were clearly the factor pushing fertility up. Alas, the latest data covering the twelve months through April 2013 shows that this process is now exhausted with 2013 births counts down 8.7 percent on 2010 peak.

Offsetting the initial rise in births, the Great Recession pushed Ireland back into becoming a net emigration nation once again, for the first time since 1995. Data published by the CSO last week shows that in 12 months through April 2013, total of 89,000 people have left the country. This is the highest number since the records started in 1987. There was a small increase in immigration driven primarily by importation of specialist foreign workers by the booming ICT and IFSC sectors, plus the return of students working on 1 and 2-year visas abroad. Despite this, 2013 marks the fourth consecutive year of net emigration.

Current rates of emigration are running ahead of the 1987-1995 period average. Back then, net emigration from Ireland averaged 14,811 per annum. Over the last four years, the average net outflow of people from this country stood at 30,600 annually.

The twin squeeze of declining birth rates and strong net emigration has resulted in 2013 posting the weakest overall population changes in 23 years. In 12 months through April 2013, Irish population grew estimated 7,700 - one seventh of the annual average for the 1991-2007 period. This brings us dangerously close to a rerun of the 1980s-styled demographic collapse when Irish population actually declined in three years through 1990.

Truth be told, we are probably caught in this 'back to the future' demographic warp already.

Our official statistics show inflow of 29,400 immigrants, excluding the returning Irish nationals and the immigrants from the Accession states, in the 12 months through April 2013. Majority of these are likely to be foreign workers brought into the country temporarily by the MNCs. Moreover, the current CSO estimates are based on PPS numbers, foreign visas issuance, as well as household surveys. These methods are potentially underestimating the numbers of those Irish nationals who have left the country, but still have close family remaining here. Last, but not least, our data is probably also underestimating outflows of the EU12 Accession states’ nationals.

Controlling for the above factors, it is highly likely that we are already experiencing a reversal of the ‘demographic dividend’ and the onset of the zero-to-negative population growth in Ireland since 2011. This has meant that our population today is some 436,000 below where it would have been if the trend established between 2000 and 2007 were to continue.


Ireland's emigration flows and population changes by age and nationality are retracing the structural collapse of our economy: the story of our paralysed and polarised society burdened by debts, taxes, unemployment, lack of opportunities for career advancement and fear for the future.

From 2010 through 2013, the numbers of Irish nationals opting to leave the country net of those returning from abroad have been rising steadily. The net outflow of Irish nationals more than tripled between 2010 and 2013. If between 2006 and 2008, some 32,100 more Irish people returned home than left Ireland, over the subsequent 5 years, 90,700 more Irish people emigrated from the island than moved here.

In addition to the above, there are some new undertones that are emerging in the data over the last two years.

Official data on population breakdown by age groups shows that the bulk of population declines over the crisis in Ireland took place in the 15-29 year olds cohorts. However, since 2011, the 30-39 year olds cohort is also posting declining numbers. These age-related trends are now pushing us toward twin age dependency scenario where the numbers of old age-dependent residents and young age-dependents peak at the same time. Top productivity cohorts - ages 34-54 - grew by 124,000 since 2007, while old and young age dependents cohorts are up 203,600 over the same period of time. Working age cohorts (20 years of age through 64 years of age) accounted for 62.4 percent of Irish population in 2007. This year the ratio is 59.7 percent.

Compared against the age distribution of the unemployment, the latest trends suggest that jobs losses are no longer the sole drivers of emigration. Instead, it appears that emigration is increasingly afflicting those groups of population that are generally more secure in their jobs. The potential reasons for this are household debt overhang and lack of promotional opportunities open to the younger workers here.

While the numbers of emigrants between 15 and 24 years of age remained basically unchanged over 2011-2013 period, the numbers of emigrants between 25 and 44 years of age rose by a third. With this, there was a corresponding rise in families relocating abroad.

With banks starting to move more aggressively against distressed borrowers, these sub-trends are likely to strengthen over time.

Economic and social losses arising from debt crisis are also likely to increase as migrants due to debt and/or career considerations are more likely to carry with them above average skills, productivity and earning potential. In addition, these migrants are less likely to return to Ireland, especially if the debt they leave behind remains on the record against their names.


The impact of the current wave of emigration on our society and economy is likely to be more long lasting than that of the previous emigration waves. This conjecture is supported by a number of considerations.

Today’s emigrants are conditioned by their education, past employment experiences and social values systems to accept the mobile nature of their future careers. In other words, having left Ireland they are unlikely to look back at their homeland as a natural home. Increasingly, Irish emigrants are setting their sights on geographies that are more remote from Ireland than the UK and continental Europe. This puts more stress on their ties to Ireland. The latest data showing that emigrants to countries like Australia, New Zealand and Canada tend to show lower returns in recent years. In addition, debt legacy will hold many of them back from returning to Ireland in the future. Age-related considerations with further reinforce this effect, with many emigrants in their mid-30s and 40s today facing a prospect of never again being able to secure a mortgage in Ireland were they to attempt a comeback. Lastly, a major factor in today’s emigration from Ireland is that it involves greater proportion of emigrants who enter their host destinations legally, thus increasing their chances at future naturalisation.

Overall, CSO data confirms the above observations, as fewer and fewer Irish nationals are today returning back home.


Far from being a solution to our economic woes or a temporary safety valve for the economy saddled with high levels of unemployment, current wave of emigration from Ireland is undermining the prospects of economic recovery here. More crucially, by removing more politically and socially disenchanted and activist younger people and families, the emigration is acting to mute the voices of dissent here. With them, the raison d’etre for the robust political, social and economic changes is slipping away too.





BOX-OUT:

Markit-Investec Purchasing Manager Indices for Irish Manufacturing and Services have both posted significant gains in August, compared to July. August PMI for Manufacturing came in at 52.0, showing the fastest pace of economic activity growth for the sector since November 2012. Meanwhile, Services PMI reading of 61.6 was the highest since February 2007. Both indices are subject to significant distortions from the multinational companies based here. However, Services PMI is subject to more severe skews due to the tax arbitrage activities by companies operating in international financial services, ICT services and auxiliary business support services. Nonetheless, caveats aside, the latest data strongly suggests that Ireland has moved out of the triple-dip recession in Q3 2013 and will post growth in GDP for the three months through September. Aside from this, however, the PMIs continue to signal relative weakness in the domestic sectors compared to exports and employment growth signals have weakened in both sectors of the economy. Finally, additional good news were signaled by the improved profit margins in Services, now third month running and marking the first sustained upward momentum in profits in five years. This, however, was not the case in Manufacturing, where input costs rose against basically unchanged output prices.

Friday, May 3, 2013

3/5/2013: Irish Employment in Services & Manufacturing: April PMIs

On foot of both NCB Manufacturing PMI and NCB Services PMI for Ireland for April 2013, let's take a look at underlying employment conditions signals from the two core sectors of the economy.

From the top:

Manufacturing and Services PMI readings continued to diverge in April for the 5th consecutive month, with headline PMI readings for:

  • Manufacturing PMI falling to 48.0 in April from 48.6 in March marking the second consecutive monthly sub-50 reading. 12mo MA is now at 51.3 and Q1 2013 average is at 50.1 so things are moving South for Manufacturing in recent months.
  • Services PMI rising to 55.2 in April from 52.3 in March. 12mo MA is at 53.3 and Q1 2013 average is 54.2, implying PMI readings moving North for Services in recent months.
These trends in overall PMI readings were broadly repeated in the Employment sub-index dynamics:
  • Employment index for Manufacturing slipped to 46.9 in which is significantly below 50.0 and marks second consecutive month of declines and sub-50 readings. In the last 6 months, index declined 4 times, but was below 50.0 only in two months. 12mo MA is at 51.3, but Q1 2013 average is 50.1 and this comes after 52.0 average for Q4 2012. So things are sliding and sliding rather fast.
  • Employment index for Services, in contrast, posted a robust increase in April to 55.2 from 52.3 in March. April marked ninth consecutive month of employment increases being signaled by Services PMI, which is a good strong trend. Thus, 12mo MA is at robust 53.3 and Q1 2013 average is at 54.2 - a slower rate of growth on Q4 2012 average of 56.0, but statistically significant growth nonetheless.
Tables detailing employment indices changes below:
Manufacturing:
Services:

Now for the reminder: Employment in Services has far less tangible connection to actual sector activity than Employment in Manufacturing, with volatility-adjusted 1 point increase in respective headline PMI implying 0.67 units increase in employment index in Services against 0.87 units rise in manufacturing employment index over historical data horizons:
Click on the chart to see in detail the overall dynamics y/y for April in employment and PMI indices, clearly showing the switch between Services and Manufacturing in terms of the sectors' position relative to economic recovery. If in 2011 Services were a drag on growth and employment, while Manufacturing was experiencing strong gains, by 2013 Services became the core driver for positive momentum in both growth and employment, with Manufacturing pushing economic activity and employment down.

Tuesday, March 13, 2012

13/3/2012: Irish PMIs - signaling continued weakness


An unedited version of my Sunday Times article from March 11, 2012.



This week, NCB along with Markit released the set of Purchasing Managers’ Indices (PMI) for the Irish economy, covering both Manufacturing and Services sectors. These indices are the best, albeit imperfect, leading indicator for growth, exports, corporate profits and employment in this economy and the picture they are presenting is that of continued weakness in Q1 2012 on the foot of deterioration recorded in Q4 2011. A picture that further confirms my earlier observation that Irish economy has entered a period of heightened volatility along a flat-line trend of near-zero growth.

Overall, headline reading for Manufacturing PMI shows that February activity in the sector remained broadly stable. The index of 49.7 was not significantly different from 50 – the level that marks zero growth. This marked the fourth consecutive month of below 50 index results, consistent with a shallow contraction in the sector. In contrast, Services sector index rose in February to a growth-signaling 53.3. This marked the break with previous two months when the index readings were below 50. With 6 months moving average at 50.9, the surveys of purchasing managers suggest that Services are, broadly speaking, on a flat growth trend.

The core drivers for the two sectors’ performance have been changing in recent months.

In Manufacturing, new orders that generally lagged growth in new exports since November 2011 are now the main driver of activity to the upside. New exports have fallen into contraction territory in February for the first time in three months, while overall new business posted flat performance for the first time after three months of declines. This signals that consumer goods producers, rather than MNCs-led goods exporters, drove the overall change in the sector activity. In longer-term trends, new orders are still signaling contraction at 48.3 and new export orders are stagnant at 50.0 on average over the last six months. It appears that our exports-led recovery has run out of steam in Manufacturing – having posted shallow expansion over the last 12 months, as exports growth fell to zero since September 2011 and new orders have been on the declining trend since June 2011.

In contrast, Services show continued exports-driven growth. Thus, new business orders came in at a relatively positive 53.5 in February underpinned by faster growth in new exports at 55.2. Although weak performance of the new business activity in the sector was present in virtually all months since March 2011, this February indicator was the strongest in seventeen months. Overall, new exports posted on average modest growth at 52.5 in 12 months through February 2012 a slowdown on 53.4 average recorded over the last 2 years.

All of this suggests no uptick in the overall economic growth as measured by GDP and GNP in Q1 2012. More critically, the data signals potential deterioration in the underlying external trade balance for Ireland. The reasons for this are two-fold. On the one hand, slower activity in Manufacturing has resulted in slowdown of inputs purchases in previous months, meaning that firms have been exhausting their stocks of inputs into production. This, in turn, sustained suppressed levels of imports over the last ten months that contributed positively to overall trade surplus and our GDP in the past. Going forward, either imports must accelerate to support exporting activity or exports must drop, which is likely to show up in the national accounts as a negative for GDP.

On the other hand, continued collapse in profit margins in both sectors will put pressure on value added in the economy, further undermining any growth momentum we might have. Contrary to the reports from the CSO, which uses aggregated data skewed by larger firms’ and multinationals’ earnings, both manufacturing and services PMIs have been showing sustained decreases in profit margins over much of the crisis.

Thus, input costs inflation in Manufacturing accelerated in February to the highest levels since June 2011, driven by higher raw materials and energy costs, compounded by a weaker euro. We are now in a third consecutive month of rising costs in Manufacturing. In fact, last time trends showed a decline in inputs costs was in December 2009. At the same time, producers continued to cut their gate prices in February for the seventh month in a row. In the last 12 months, average index reading for input costs inflation stood at a massive 61.9 against output prices being close to flat at 50.9. Much the same is taking place in Services sector, where inputs costs remain on inflationary path since December 2010 and output charges have been showing uninterrupted deflation since August 2008.

In contrast with the latest QNHS results for Q4 2011, the PMI data shows tightening, not easing conditions for jobs creation and employment in both sectors of the Irish economy. In Manufacturing, February marked a 46th consecutive month of falling inventories and in Services, with exception of just one month, this trend prevails for all periods since August 2007. This implies that both sectors continue to run spare productive capacity and are basically holding out on significant cuts in production and employment only in a hope of a turnaround in some near-term future.

In contrast with PMI data, this week’s QNHS data showed quarter-on-quarter seasonally adjusted rise in employment by 10,000 with increases in seasonally-adjusted employment taking place across a number of sectors such as Industry, Accommodation and food service activities, ICT, Financial, insurance and real estate activities, Public Administration, and Human health and social work activities.

Alas, more comprehensive reading of the CSO data shows that the headline 10,000 figure was driven by a number of factors completely unrelated to actual jobs creation.

Real employment in Q4 2011 relative to Q3 2011 was up not by 10,000, but by 2,300, with full-time employment falling by 700 and part-time employment rising by 3,000. Which suggests that seasonal adjustments made to the data could have been impacted by significant changes in employment since the beginning of the crisis and not by actual jobs creation. Critically, the number of part-time workers who consider themselves not to be underemployed fell 2,800, while the number of part-time workers who reported being underemployed rose 5,800. Year-on-year changes clearly show that overall employment remains on a decline and the only growth category of workers since Q1 2011 is that of underemployed part-timers.

The above suggests that most, if not all, of the new jobs showing up in the seasonally-adjusted data represent additions arising from the JobBridge training initiative and reflect the effects of past employment contractions on seasonal adjustment. This is further reinforced by age and occupational analysis of the CSO data.

Reinforcing the above conclusions, PMI data for Services has been signalling not a growth, but a contraction in employment over the last 10 months, with February 2012 reading of 47.9. In fact, Services employment has been on a continued uninterrupted decline since March 2008, excluding only one month of increases in April 2011. Manufacturing employment activity has been now declining in five of the last six months, clearly contradicting seasonally adjusted data from QNHS.

Correlations between new exports orders, new orders and employment data from PMIs very clearly show that in January-February 2012 we have moved into a jobless recovery territory in Services, characterized by positive annual growth in exports and declining employment. In Manufacturing, where exporting boom has been now running over 3 years, we are in the jobs destruction and stagnant exports territory for the last two months running.



CHARTS: PMI-signalled Economic Activity: Manufacturing and Services


Source: Author own calculations based on NCB and Markit data
* Q1 2012 data is based on January-February averages
Note: In charts, negative values show contraction in activity, positive values signal expansion



Box-out:

In recent weeks we have seen some significant disagreements emerging within the Troika. Whilst the ECB remains silent on the issue of sustainability of Irish Government debts, the IMF appears to believe that we should be allowed to restructure at least some of our banking sector liabilities. The EU Commission in its March 2012 review of Ireland’s participation in the bailout programme clearly thinks that further deterioration in our growth conditions and/or renewed credit crunch  “could require additional fiscal tightening later in the year”. This clearly shows that the EU Commission will require Ireland to bring its fiscal performance back in line with the targets set out in the programme by enacting new cuts should any deterioration materialise. However, the IMF review of Ireland’s participation in the programme, released at the very same time as that by the EU, states that should growth slowdown lead to Ireland jeopardizing its programme commitments on the deficit side this year, the Government can let the targets slip this time around, “to avoid jeopardizing the fragile economic recovery as envisaged under the program.” You know something is amiss within the Troika, when the IMF starts cautioning its overzealous partners not to derail recovery for the sake of sticking to fiscal targets.