Showing posts with label Exclusive Irish Economy. Show all posts
Showing posts with label Exclusive Irish Economy. Show all posts

Tuesday, February 18, 2020

18/2/20: Irish Statistics: Fake News and Housing Markets


My latest column for The Currency covers the less-public stats behind the Irish housing markets: https://www.thecurrency.news/articles/9754/fake-news-you-cant-fool-all-of-the-people-all-of-the-time-on-property-statistics.

Key takeaways:
"Irish voters cast a protest vote against the parties that led the government over the last eight years – a vote that just might be divorced from ideological preferences for overarching policy philosophy."

"The drivers of this protest vote have been predominantly based on voters’ understanding of the socio-economic reality that is totally at odds with the official statistics. In a way, Irish voters have chosen not to trust the so-called fake data coming out of the mainstream, pro-government analysis and media. The fact that this has happened during the time when the Irish economy is commonly presented as being in rude health, with low unemployment, rapid headline growth figures and healthy demographics is not the bug, but a central feature of Ireland’s political system."

Stay tuned for subsequent analysis of other economic statistics for Ireland in the next article.

Wednesday, October 1, 2014

1/10/2014: Irish Manufacturing PMI: September


Irish Manufacturing PMI released by Investec/Markit today signalled de-acceleration of growth in September.

  • Headline Manufacturing PMI declined from 57.3 in August to 55.7 in September. The reading is still ahead of July 55.4 and remains statistically significant above 50.

September correction does not represent a shift in the trend, which remains solidly up:

  • 12mo MA is at 54.7 and September reading is ahead of that. Current 3mo MA is at 56.1 and well ahed of previous 3mo MA of 55.5. 3mo MA through September is solidly ahead of the same period readings in 2010-2013.
Investec release provides some comments on the underlying series sub-trends, but I am not inclined to entertain what is not backed by reported numbers.

On the balance, it appears that Manufacturing sector retain core strengths and that expansion continues. This marks thirteenth consecutive month of PMI readings above 50 (statistically significant) and 16th consecutive month of PMI reading above 50 (notional).

Monday, September 1, 2014

1/9/2014: Irish Manufacturing PMI: August 2014


Irish Manufacturing PMIs released by Markit and Investec today show very robust and accelerating growth in the sector in August. These are seasonally adjusted series, and given this is a generally slower month for activity, acceleration is more reflective of y/y trends than m/m. Nonetheless, the PMI hit 57.3 in August, up on already blistering 55.4 in July, marking the highest PMI reading since December 1999.

Per release: "…output and new orders each rose at sharper rates. This encouraged firms to up their rates of growth in input buying and employment. Meanwhile, input prices fell for the first time in over a year and firms lowered their output charges."

This marks fifteenth consecutive monthly rise in Irish Manufacturing PMIs.

New orders and export orders are up (allegedly, as we have no data given to us by the Markit/Investec), but part of the sharp rise was down to firms working through backlog of orders, so that forward backlog of orders fell. This can lead to moderation in growth in months ahead 9note: moderating growth is not the same as contraction, so there is no point of concern on that front).

Full release here: http://www.markiteconomics.com/Survey/PressRelease.mvc/8ce17d65c9e14a54911931a09076cfbb

Couple of charts:


The above shows that Manufacturing PMI in Ireland is strongly breaking out of the post-crisis period averages, pushing the average toward longer-term levels observed in pre-crisis period. Thus, by PMI metric, Irish Manufacturing should have already fully recovered from the effects of the crisis. Alas, of course, we can see from the latest QNHS data that this is not the case when it comes to employment levels in the sector: http://trueeconomics.blogspot.ie/2014/08/3182014-changes-in-employment-by-sector.html In fact, Industry (ex-Construction) employment has been shrinking, not growing.

Chart below shows the shorter-term trends, distinguishing three periods in recent history:


Despite very robust rates of growth, overall PMIs expansion in the second period of recovery (second shaded block) have been slower than in the first period of recovery. But the trend is for solid recovery, nonetheless.

So lots of good news overall, but we will need a confirmation of this from actual production data, exports data and employment data in months to come. Let's hope the PMIs are signalling more than subjective optimism.

Thursday, August 21, 2014

21/8/2014: Economy in a 'Not me, but maybe you?..' recovery


This is an unedited version of my column for the Village Magazine, June-July 2014 (date of filing: May 24, 2014)


There has been a uniformly singular analysis of the fallout from the European and local elections last week, the leitmotif of which is the view that the voters have vented their frustration and disappointment with the policies the coalition government. Majority of these policies, relate to the economy. Going into elections, candidate after candidate insisted on recounting the successes of the Fine Gael and Labour in reversing the pains of economic crisis: tens of thousands of jobs created, economy stabilised, property markets and investment on the upside and households finally facing into the prospect of tax cuts in the Budget 2015. Save for the contracting pharma sector – suffering from ills of the patent cliff unrelated to Ireland and the Government – things are getting brighter by the minute.

The voters bought none of these claims. Still, the question remains unanswered: has the economic decline been reversed during the years of coalition management?

It is a difficult question to tackle. So let us try and face up to the core facts with a measure of cold statistics.

In very broad terms, the economy can be broken into private consumption, Government consumption, private investment, public investment, and net exports (exports less imports) of goods and services. Everything, excluding net exports, taken together is known as the Final Domestic Demand. Adding to the demand net exports provides for the Gross Domestic Product. Adding to GDP inflows of payments on Irish investments abroad net of outflows of payments on foreign investments in Ireland gives the Gross National Product.

In the economy severely distorted by MNCs tax arbitrage and where foreign companies account for the entire trade surplus (the positive measure of net exports), the Domestic Demand is the measure of economic activity that most accurately measures what takes place in the country. It excludes the pharma sector and the ICT services exporters who are pushing massive accounting revenues and profits into our national balancesheet.

The simple statistical fact is that final domestic demand rose in Q4 2013 by EUR630 million compared to Q4 2012, although for the full year 2013 it was down EUR366 million, once we adjust for inflation. This means that 2013 was the sixth consecutive year of declines in domestic demand, but it also means that toward the year end things started to look a little sunnier.

Looking at the composition of our demand, both public and private consumption fell in 2013. These declines were moderated by a rise in gross domestic capital formation (or in more simple terms, investment), which rose EUR710 million year-on-year. Much of this ‘upside’ was Nama and IDA attracting foreign investors to Dublin. In other words, it had little to do with our real economy.

While on the topic of property investments: house prices and commercial real estate valuations did rise through 2013 in Dublin and trended down in the rest of the country. But since the on-set of 2014, things have gone slightly off the rails. National property prices index peaked at 70.0 in December 2013 and have slipped to 69.1 by March 2014. In Dublin, this decline was even more pronounced - from the local peak of 68.5 at the end of 2013 to 67.2 in February and March 2014. Building and construction activity picked up in 2013, with index of activity by value of construction up from 94.3 in Q4 2012 to 105.4 in Q4 2013 and volume up from 95.7 to 106.2 over the same period.

Here's the kicker, however: much of the above growth related to completions of already started projects and retrofits. Planning permissions for new construction, stripping out alterations, conversions and renovations fell year on year in Q4 2013 and were down over the full year. The pipeline of building permissions into the near future looks dire.

In contrast, contribution of industry, excluding building and construction to GDP was down EUR1.1 billion in 2013. Overall, of the five broad sectors of the economy contributing to our GDP, three posted decreases in activity compared to 2012 and two recorded increases.

Here's an interesting comparative. As Chart 1 below clearly shows, since the current Government came to power in Q1 2011, our real GDP in constant factor cost terms grew on average by less than 0.76% per annum. In the recovery of the 1990s this rate of growth was around 14 times faster. Agriculture, Forestry and Fishing; Industry; Distribution, Transport Software and Communication; and Public Administration and Defence – four out of five broad sectors of the economy are down over 3 years of Government tenure. Only Other Services (including Rent) sector was up. No prizes for guessing which sector is dominated by internet giants pumping tens of billions of revenues and profits earned elsewhere around the world into Ireland to be recycled to tax havens.



Things are even worse when we consider domestic economy excluding external trade. Personal Expenditure on Consumer Goods and Services shrunk 3% in the tenure of this Coalition, falling at an annual rate of 1%, Net Expenditure by Central and Local Government on Current Goods and Services is down at an annual rate of decline of 2.4%, while Gross Domestic Fixed Capital Formation fell at an average annual rate of almost 2.3%.

So by all metrics, save the one that covers Google & Co, the Coalition record to-date is hardly impressive.

Which leads us to another question: what is there to look forward to in the economy between now and the next general election?

Assuming the current Coalition remains in power through its term, there are some positive signs on the led-grey economic horizon. The data on these positives is not exactly convincing, but still, some signs are better than none.

Little as they matter in current environment with no established economy-wide trend and a lot of volatility, the Purchasing Manager Indices for Manufacturing and Services continue to move deep in the growth territory. Investment remains sluggish, with credit in the economy continuing to shrink and cost of loans continuing to rise gradually. But non-traditional sources of funding are showing signs of growth: investment funds, private equity and even some direct peer-to-peer lending.

As banks shift defaulting mortgages into 'restructured' portfolios of loans, numbers of new mortgages approvals, although volatile, are on a gentle upward slope. However, average value of mortgages approved continues to trend down.

Retail sales are faring much worse: value of retail sales in Q1 2014 remained static on Q4 2013 and is up only 0.6% y/y. Volume is up 0.2% q/q and is now 2.6% above Q1 2013 levels. Which means that deflation is still cutting into retail sector earnings, and with this trend, new hiring is still off the agenda of Irish retailers. However, encouragingly, retail sales have finally started to move in line with consumer confidence in recent months, although gains in retail sales still severely lag behind the confidence indicator, as the chart below shows.



Meanwhile, on the exports side, external demand for Irish goods and services might be improving at last, although you won't be able to tell this from the hard data, for now. The growth in global demand is yet to translate into indigenous exports growth for a number of reasons. Chiefly, growth in global trade volumes has shifted toward trade between middle income and emerging economies, away from advanced economies. This pattern of trade dis-favours Ireland. MNCs based here predominantly service the US and Europe, with the rest of the world being supplied from other countries. Our own exporters are having hard time getting a strong foothold in the merging markets. In 12 years since 2002, Irish exports to markets outside the EU and North America stagnated, as a share of our total exports at a miserably low 15-17%, as the chart below illustrates.



Growing our indigenous exports will require serious rebalancing of our sales and marketing efforts toward the markets outside our familiar geographies. The good news is that we have a ready base for such a push. Our competitive advantages are in the sectors where proximity to MNCs resulted in Irish indigenous startups gaining experience, intellectual property and access to early stage supply contracts, e.g. auxiliary services in international finance, ICT and biotech. The challenge, however, is to continue generating exports-oriented startups, while forcing more indigenously firms to export. The former requires financing and business development supports that are very scarce on the ground, especially for companies not clients of the Enterprise Ireland. The latter is a challenge no one has been able to tackle to-date.

Majority of companies operating in the Irish economy are engaged in reselling foreign goods and services without any serious value added to them. In order to push these firms into exporting, they need to identify potential ways for adding value to imported goods and services and then identify the markets and the path for entering these markets, where this value-added can generate sales. Parallel to this, Irish firms are facing an uphill battle to increase productivity of their capital and workforce to make certain that any value added is not consumed by the internal inefficiencies. While during the crisis, Irish economy regained some share of its competitiveness lost during the Celtic Garfield years of 2001-2008, these gains were achieved predominantly through two channels: productivity growth due to on-shoring of large-scale ICT services providers (Google, Amazon, etc), and due to massive jobs destruction in less-productive sectors, such as construction and retail, and other domestic services. Which, incidentally, shows that our Government’s claims of competitiveness gains are barely scratching the surface in terms of revealing the underlying trends in this economy. Stripping out the MNCs with their tax arbitrage, Irish economy is more competitive today than it was in 2004-2006 only because we are no longer employing builders and not adding more convenience shops to every street corner of every town. This is hardly a form of productivity gains that can make our products more competitive on supermarkets’ shelves in Canada or our services supplied to an Indonesian investment bank.

The final drag on the prospects for exports-led growth relates to skill sets required. These skills rest predominantly outside the current vast pool of the unemployed. Despite the claims of 70,000 new jobs created by the Government, data from CSO shows that in Q1 2014, there were only 49,500 fewer unemployed in Ireland than in Q1 2010, of which 14,314 came from higher numbers in state training programmes, such as JobBridge. Meanwhile, numbers of those in unemployment for over 1 year – the period commonly associated with long-term losses in skills and employability – declined by only 20,800 in 3 years of the current Coalition rule. If in Q1 2011 when this Government came to power, 57.5% of all unemployed were jobless for longer than 12 months, in Q1 2014 this proportion rose to 60.5%. Demographically, numbers of older workers (age 45 and older) without jobs rose by 5,900 during the tenure of the Coalition, and number of older workers out of jobs for more than 12 months is now up by 7,000.



While the Government has been successful in reversing the trend in rising unemployment, the progress to-date has been relatively weak compared to the enormous task at hand. Irish economy has been creating new jobs that suit skills and career progression of the younger workers – jobs that require excellent command of foreign languages, coding, technical services that cannot be easily taught to those of older age. Majority of new jobs being created are at the earlier stage of careers, meaning that they are basically of no use to mortgaged and indebted middle-age households with children and ageing parents. In addition, these starter-level jobs are not likely to improve pensions prospects for those currently unemployed, especially those of age above 45, when savings for retirement must be ramped up aggressively.


All of the above problems as well as opportunities are closely interlinked and reach across all groups and segments of our society and all sectors of our real economy. They require not just a policy response, but a coherent, long-term and comprehensive strategy. So far, such a strategy remains wanting. The Coalition might deserve credit for doing the hard thing over the last three years, but it still an open question whether it deserves the credit for doing the right thing.

Saturday, August 2, 2014

2/8/2014: Irish Manufacturing PMI: July 2014


Markit and Investec released Irish Manufacturing PMI this week. The numbers are pretty good:
  • Headline PMI stood at 55.4 in July 2014, against 55.3 in June.
  • 12mo average is at 54.0 and 3mo average is at 55.2. Readings above 54.3 are strong, so that's good news. Previous 3mo period average was 54.8 and both current 3mo average and previous are strongly above same period averages for 200-2013.
  • No comment from me on the rest of the index components as Investec no longer publishes any actual readings. Press release is here: http://www.markiteconomics.com/Survey/PressRelease.mvc/28b6c4cab7b94cef8d7f0b557c894220
Couple of charts: Index deviations from 50.0 and snapshot to current period, highlighting two periods of growth gains:


Dynamically, the data is showing significant reductions in volatility in recent months, with standard deviations trending around pre-crisis averages.

Top takeaways: improved trading conditions in the sector seem to be linked to overall gains in the external outlook in key exporting markets, which means Irish manufacturing remains locked into exogenous demand (subject to possible shocks) and remains anchored to the fortunes of the MNCs (subject to longer term risks to production relocations). Good news on short-term dynamics, but Ireland still lacks over-arching strategy for the sector.

Tuesday, July 1, 2014

1/7/2014: Irish Manufacturing PMI: June 2014


June Manufacturing PMI for Ireland (released by Markit and Investec) posted a small gain, rising to 55.3 from 55.0 in May. 3mo MA is now at 55.5 and this is above the previous 3mo MA through March 2014 which stood at 53.7. 12mo MA is at 53.7 which implies that we have positive growth in manufacturing over the last 12 months. 3mo MA through June 2014 is above same period averages for 2010-2013.

Chart to summarise the series:


We are now on an upward trend from April 2013 and series are running above 50.0 marker thirteen months in a row:


And expansion remains statistically significant and well ahead of the 'recovery' period average:

All are good signals. Too bad Markit would not release more detailed sub-indices numbers, which prevents me from covering trends in Employment, Profit Margins and New Orders data.

One caveat: rate of improvement in June (m/m) was just 0.3 points, which is below 12mo average of 0.4 points and 3mo MA of m/m changes in the index are now -0.1 points, which is a slowdown on 3mo MA through March 2014 (+0.7 points) and on 3mo MA through June for 2013 and 2012.

Saturday, June 28, 2014

28/6/2014: Irish Retail Sales: Q2 data to-date confirms fragile recovery


In the previous post I covered detailed analysis of Core Retail Sales data for May 2014: here. Now, a quick look at Q2 averages (for 2014 we have average over April and May) for the period from 2005 through latest.

Take a look at the chart plotting declines (as of April-May average) in retail sales activity compared to peak for Q2 data:


This data shows the following:

  1. The only two sub-categories of goods and services where retail sales indices in Value terms are in shallower decline than in Volume terms (in other words inflation is positive and feeding through to consumers) are: Automotive Fuel and Bars - in other words two sectors where prices for inputs are largely controlled/set by the state.
  2. No category has recovered pre-crisis levels of retail sales by both value and volume, while only one category (Food) recovered sales in volume, relative to pre-crisis activity.
This puts into perspective the extent to which the recovery we are experiencing so far is fragile. 

28/6/2014: Irish Retail Sales Activity: May 2014


There is a lot of hoopla about Irish retail sales stats released today by CSO. Irish and foreign media and even some analysts are quick to point to the headline numbers showing high rates of growth and some are going as far as describing Ireland's miraculous recovery. So what, really, is going on?

First of all, let's consider top level numbers: removing motor trades and fuel, Core Retail Sales:

  • In Value Index terms, things have improved, which is a positive - so far in the crisis, value of sales trended well flatter than volume of sales primarily due to deflation in the sector. This was good for consumers, but bad for businesses as profit margins shrunk and with them, employment declined too. In May 2014, value of retail sales index rose to 94.6, up 1.39% y/y. Good news for retailers. Even better news: 3mo MA through April 2014 is up 1.7% y/y and 6mo MA is up 1.4% y/y. All in, we are seeing some fragile gains here.
  • Also in Value index terms, this time around based on seasonally-adjusted data: month on month things are not so good: index is down 0.31% on April. So short-term, things are not better this time around. Not to panic, of course, as they are volatile and as trend remains up, albeit gently and unconvincingly so far (see first chart). We are bang-on on the trend now.


  • In Volume index terms, the index is under performing recent trend, but is still pointing up on average. Although m/m index is down 0.48%, year-on-year volume of sales is up 3.33%.
  • 3mo MA through May 2014 compared to 3mo MA through February 2014 is up 3.7%, stronger than Value index, implying potentially lower margins. Year on year 3mo MA is up 3.33% a notch slower than 3.36% 6mo MA on previous 6mo MA.



My Retail Sector Activity Index (RSAI) capturing simultaneously Value and Volume Indices, plus Consumer Confidence, reported by the ESRI has moderated from 111.0 in April 2014 to 110.6 in May 2014. Year on year, the RSAI is up strongly, from 101.4 back in May 2013, but on shorter-run horizon, the index is just about at the levels set in February-March 2014.



Top conclusions: All of the above are good readings, suggesting that while deflationary pressures remain a challenge, core retail sales have been improving. In previous months' posts, I noted that in my view, we are now on an upward trend in terms of Volume and at the start of a more cautious upward trend in Value terms. May data confirms this, as does the chart below showing current y/y growth compared to pre-crisis historical averages.


April 2014 reading for Volume touched just above the pre-crisis average growth rate (not the levels), this moderated back in May. Value index growth rates remain disappointingly below those recorded before the Great Recession.

In terms of levels, Value index (3mo average through May 2014) is currently 41% lower than historical peak levels and 13.8% below pre-crisis average. Volume index is 37.5% below its historical peak and 8.6% down on pre-crisis average.

Thursday, June 5, 2014

5/6/2014: Irish Manufacturing & Services PMIs: May 2014


Both, Irish Services and Manufacturing PMIs are now out for May 2014 (via Markit and Investec Ireland) and it is time to update my monthly, quarterly and composite series.

In this post, let's first cover the core components in monthly series terms:

  1. Manufacturing PMI eased from 56.1 in April to 55.0 in May - a decrease that reduced the implied estimated rate of growth in the sector. Still, Manufacturing index is reading above 50.0 (expansion line) continuously now since June 2013. 3mo MA through May is at 54.8 - solid expansion and is ahead of 3mo average through February which stood at 53.1. So expansion accelerated on 3mo MA basis. The current 3mo MA is ahead of 2010, 2011 and 2013 periods readings. Over the last 12 months there have been only 3 months with monthly reductions in PMIs: November 2013 (-2.5 points), January 2014 (-0.7 points) and May 2014 (-1.1 points).
  2. Services PMI eased only marginally from 61.9 in April to 61.7 in May - this implies that services sector growth barely registered a decline and remained at a blistering 61-62 reading level. Services index is reading above 50.0 (expansion line) continuously now since July 2012, helped no doubt by a massive expansion of ICT services MNCs in Ireland, which have little to do with the actual economic activity here. 3mo MA through May is at 60.0 - solid expansion and only slightly below 3mo average through February which stood at 60.3. The current 3mo MA is ahead of 2010, 2011 and 2013 periods readings. Over the last 12 months there have been 5 months with monthly reductions in PMIs, all sharper than the one registered in May 2014.
Here are two charts showing historical trends for the series:



The two series signal economic expansion across both sectors in contrast to May 2012 and 2013:

In line with the above chart, rolling correlations between the two PMIs have firmed up as well over recent months, rising from 0.33 in 3mo through February 2014 to 0.5 for the 3mo period through May 2014.

We will not have an update on Construction sector PMI (Markit & Ulster Bank) until mid-month, so here is the latest data as it stands:
  • In April 2014, Construction sector activity index rose to 63.5 from 60.2 in March 2014. This marks second consecutive month of m/m increases. In the last 12 months, there have been 7 monthly m/m rises in the index and index has been returning readings above 50 since September 2013.
Core takeaways:
  • Both services and manufacturing sectors PMIs are signaling solid growth in the economy,
  • Jointly, the two indices are co-trending well
  • Caveats as usual are: MNCs dominance in the indices dynamics and shorter duration of statistically significant readings above 50.0 line: Manufacturing shows only last three consecutive months with readings statistically significantly in growth territory; while Services index producing statistically significant readings above 50 for the last 6 months.
  • Last caveat - weak relationship remains between actual measured activity in the sectors and the PMI signals: http://trueeconomics.blogspot.ie/2014/05/1552014-pmis-and-actual-activity.html
Next post will cover quarterly data and composite PMI.

Friday, May 30, 2014

30/5/2014: Detailed Analysis of Retail Sales for Ireland: April 2014


In the previous post on Retail Sales data, I covered Q2 comparatives across the years (http://trueeconomics.blogspot.ie/2014/05/3052014-that-state-sanctioned-inflation.html). As promised, here is April data taken on a monthly frequency.

There are several very interesting developments in terms of core retail sales data released earlier this week by CSO. Stay patient as I cover it.

Firstly, from the top level:

  • Current 3mo average for Retail Sales by Value index is at 96.7, which is below 96.9 average for the 3mo period through January 2014. Bad news. However, a ray of sunshine: Value Index did rise on seasonally-adjusted basis to 97.3 in April compared to 95.9 in March.
  • Current 3mo average for Retail Sales by Volume index is at 102.5, which is virtually unchanged on 102.4 average for the 3mo period through January 2014. Neither bad not good news. However, another ray of sunshine: Volume Index did rise on seasonally-adjusted basis to 103.3 in April compared to 101.7 in March.
  • Meanwhile, Consumer Confidence index reported by ESRI averaged 85.3 in 3 months though April 2014, which is blisteringly higher than 78.5 reading recorded across 3 months through January 2014. Bad news: on shorter 3mo average basis, Consumer Confidence continues to go boisterously where actual retail sales are not daring to move.
Chart to illustrate:

Notice the following from the chart above:

  1. Bottoming out on trend in Consumer Confidence took place around Q1 2011. Bottoming out in Volume Index of Retail Sales took place around Q2-Q3 2012. Bottoming out in Value Index of Retail Sales is yet to be established, though it appears that it might have happened around Q4 2013. Thus, Consumer Confidence can at best be a weak indicator for changes in Volume and counter-predictor to changes in Value of Retail Sales
  2. Consumer Confidence is rising much faster, over sustained period of time, than Volume of Retail Sales which itself is outpacing Value of Retail Sales. In other words, even massive and sustained reductions in the retail sector margins are not being able to explain in full the boisterous dynamics in Consumer Confidence.
Now onto my own Retail Sector Activity Index (RSAI), which is a weighted average of 3mo MAs for Volume and Value of Retail Sales Indices and Consumer Confidence:



Couple of things worth noting:

  1. RSAI shows, finally, a breakaway from the flat trend that held the sector down between 2009 and much of 2013. This is good news. The RSAI is now at 111.0 up on 110.6 in March 2014 and on 3mo MA basis it is up from 107.7 over 3 months through January 2014 to 110.7 currently.
  2. RSAI in most recent two months has been visibly slowing down in the rate of growth, despite massive rises in Consumer Confidence. This can signal some weakness coming down the road. Or it might signal temporary slowdown (remember, this is seasonally-adjusted data).
Lastly, let's revisit correlations between various indices. Three tables below summarise:




Core takeaways from the above tables:
  • Consumer Confidence Index (CCI) has now moved into correlation range with Volume of sales that is similar to the one observed prior to the crisis: 0.757 vs 0.741 and this correlation is no longer negative. This confirms what I said above in the analysis of the first chart. And this is potentially good news, as it suggests firming up of the upward trend in the Volume of sales.
  • Consumer Confidence Index remains weakly correlated with Value of Sales (0.393) as compared to pre-crisis (0.720), but it is now also positive as opposed to crisis period readings. This means, as I said above, that it is probably too early to call growth trend in Value series, but it is now time to watch the series closely for confirmation of denial of such trend.
  • Much of the RSAI index performance is skewed by the CCI presence in the series computation. Still, the index tracks much better the Value and Volume activity in the Retail Sector than the CCI.

Thursday, May 8, 2014

8/5/2014: Irish Manufacturing & Services PMIs: April 2014

Irish Manufacturing and Services PMIs were out for April both showing aggregate gains, both not reported sufficiently in terms of data coverage to make any verifiable statements about composition of these gains.

Let's start from Manufacturing figures first:
  • April 2014 PMI reading was at 56.1 - which is well above statistically significant bound of expansion. 
  • 3mo MA through April is now at 54.8, some 1.9 points above 3mo MA reading though January 2014 and 5.5 points ahead y/y. Both good indicators of improving growth in the sector.


On Services side:
  • April 2014 PMI reading was at blistering 61.9 - which is strongly above statistically significant bound of expansion. 
  • 3mo MA through April is now at 60.0, basically flat on 3mo MA reading though January 2014 (60.13) and 2.8 points ahead y/y. Both good indicators of continued strong growth in the sector.




However, 3mo MA on 3mo MA changes are not spectacular in Services sector, as the chart below shows. This might simply be due to already sky-high readings attained in recent months.



Both indices show expansion in the economy (a changed from same period 2013) and as the chart below shows, correlation between the two indices is running strong (both co-move currently).



So based on top-level data, things are improving. The caveats are as usual:
  1. We have no idea what is happening on the underlying side of the above stats as Investec & Markit no longer make available sub-indices information
  2. Much of the PMIs-signalled activity is not coinciding with actual activity on the ground over the medium term (although some indications are that once we are firmly on growth trend path, the two sets of data - CSO and PMIs - will start comoving again).
In short, just as sell-side stockbrokers reports and Consumer Confidence Indicator, PMIs are least useful in telling the real story just when the demand for such story is most acute. 

Wednesday, April 2, 2014

2/4/2014: Irish Manufacturing PMI: March 2014


We now have Manufacturing PMI for Ireland for Q1 2014, so here are couple updated charts:




Few notable things in the above:

  1. PMI now solidly above the 'statistical significance' range for the first time since October 2013. Also, March 2014 marks eighth consecutive month of PMI ahead of its post-crisis average (from January 2011).
  2. The post-crisis average is still lower than pre-crisis average.
  3. PMI continues to trend up with new short-term trend running from around June 2013.
  4. 12mo average is at solid 52.1 and 3mo average through March (Q1 2014) is at 53.7 which is basically identical to 3mo average through December 2013 (Q4 2013) which is 53.6. 
  5. Q1 2014 average is above same period reading for 2011 (49.8) and 2012 (50.1), but it is below same period 2010 average (56.1).
Key takeaway: solid PMI reading for Irish manufacturing - a good thing. As I noted before, Manufacturing PMI has stronger link to our GDP and actual industry output than Services PMI, so this is a net positive for the economy.

Friday, February 28, 2014

28/2/2014: Duration of Unemployment: QNHS Q4 2013


Continuing with the coverage of Q4 2013 QNHS results for Ireland:
- First post covering detailed analysis of employment by sectors: http://trueeconomics.blogspot.ie/2014/02/2722014-employment-by-sectors-qnhs-q4.html
- Second post covering employment across broader sectors and categories: http://trueeconomics.blogspot.ie/2014/02/2822014-new-employment-across-broader.html
- Third post covering Participation and Unemployment Rates: http://trueeconomics.blogspot.ie/2014/02/2822014-participation-and-unemployment.html

In the current post let us consider changes in duration of unemployment.

The CSO reports two basic duration metrics:
- Less than 1 year,
- 1 year and over
And the data covers different age groups:
- All population 15 years and older
- Population 15-24 years of age,
- Population 25-44 years of age, and
- Population 45 years of age and older.

Here are the charts and quick commentary on these. The data is not seasonally-adjusted, so there is a lot of volatility and I am not going to do q/q analysis here.

For overall population 15 years of age and over:

  • Q4 2013 total unemployment declined 14.05% (41,400 in level terms) compared to Q4 2012. In 2012, Q4 y/y decline was -6.1% (-19,300 in level terms). Thus, 2013 numbers are much better compered to 2012 numbers, as one should expect.
  • Of these, unemployment numbers for duration less than 1 year have declined 18% (-20,900) in Q4 2013. Te good news - this reversed 2012 y/y rise of 2.0% (+2,300).
  • Unemployment with duration over 1 year has fallen as well, in Q4 2013 this was down 11.8% (-20,900) compared to Q4 2012, which is a small gain on decline recorded in Q4 2012 (y/y -10% and -19,700).

So good news here is that numbers are declining for both long-term and short-term unemployed. However, while overall unemployment numbers have now fallen to the levels below those recorded in Q4 2009 (though ahead of those in Q4 2008), long-term unemployed numbers are down to the levels below those recorded in Q4 2010 and are way ahead of those in Q4 2009.


Since the current Government came to power (H1 2011), unemployed numbers for those over the age 15 are down 59,300, of which 36,050 declines came from the ranks of short-term unemployed and 22,050 declines came from the ranks of long-term unemployed.

Given the difficulty of reducing long-term unemployment compared to short-term unemployment, this is still a good record.

However, given that we do not know how many of long-term unemployed are gaining jobs vs how many are dropping out of the labour force (emigration or exits from workforce) we really have little to go in identifying how god the above aggregates really are.

Charts below plot unemployment by duration for different age groups.




Youth unemployment (15-24 years of age) is shrinking. Across total youth unemployment, in Q4 2013 numbers unemployed fell 17.3% y/y (down 10,200 in level terms), building on 12.9% (-8,700) decline in Q4 2012.

Compared to H1 2011, youth unemployment is down 19,950 (-29%) overall, with 11,000 of this decline coming from short-term unemployed figures and 8,450 from long-term unemployed ranks.

The problem with the above numbers is that we do not know the sources for these declines in youth unemployment. These, in addition to people gaining jobs, include demographic transition (entry of new young workers and exists of previously younger workers into the next category of 25-44 year olds), exits to and entries from education and training, including State Training programmes, emigration, including short-term migration on post-education visas and so on).

The weakest performance by age group is in the 45 and over category. Here, in Q4 2013 the numbers unemployed declined only 8.6% y/y (down 6,900 in level terms). The good news is that this reversed the rise in unemployment in this category recorded in 12 months through Q4 2012 (+3.0% and +2,300). Compared to H1 2011, numbers unemployed in this age group are still higher (+2.8% and +2,000). Numbers of long-term unemployed dipped in Q4 2013 only slightly (by 6.7% or -3,700) and compared to H1 2011 long-term unemployment in this age category is still up +11.4% or +5,250.

So overall, these are pretty solid numbers,with core reading showing that total number of unemployed for age 15 and over is currently at the lowest level for any Q4 period since (and including) Q4 2009.

Lastly, on severity of long-term unemployment, consider the chart plotting percentage of long-term unemployed in each age group total unemployment numbers:


This clearly shows that since around H2 2012, the positive trends in overall unemployment are broadly translating into symmetric reductions in unemployment for both short-term and long-term unemployed for all age groups. Again, this is a positive trend in the short run, as long-term unemployment is the hardest (or the stickiest) of all forms of unemployment and we can expect an upward trend in these charts. This was indeed the case in the period prior to H2 2012. Since then, however, we are seeing reductions in unemployment of relatively similar proportions for short-term and long-term unemployed.

28/2/2014: Participation and Unemployment Rates: QNHS Q4 2013

Having covered sectoral and broader aggregates QNHS results for employment levels (see post here for links: http://trueeconomics.blogspot.ie/2014/02/2822014-new-employment-across-broader.html), it is now time to take a look at participation rate and unemployment rate.



At the end of Q4 2013, seasonally-adjusted participation rate stood at 60.4%, up on 60.3% in Q3 2013 and 59.8% in Q4 2012. Compared to H1 2011 average (the period when the current Government came to power), the participation rate is up 0.3 percentage points.

Historical average for the seasonally-adjusted rate is 60.77% so we are just a whisker away from hitting this landmark. At the current rate of adjustment, we should be there around Q2-Q3 2014.

At the end of Q4 2013, official seasonally-adjusted unemployment rate fell to 12.1 from 12.7 in Q3 2013 (a very strong decline),  this marks the second sharpest correction downward in unemployment rate for the entire period of the crisis.


Over the year, seasonally adjusted unemployment rate has fallen full 2.1 percentage points from 14.2 to 12.1, improving on 2.0 percentage points decline y/y in Q3 2013. Compared to H1 2011, unemployment rate is now down 2.5 percentage points.

Q4 2013 marks the fifth consecutive quarter of declines in unemployment rate (q/q terms) and current rate is at the levels comparable with Q2 2009. All of which is very good news, despite all the possible caveats to data arising from potential impact of emigration and state training programmes participation (I will be covering these figures in my analysis of broader measures of unemployment as usual, next).

28/2/2014: New Employment Across Broader Categories: QNHS Q4 2013


In the previous post (http://trueeconomics.blogspot.ie/2014/02/2722014-employment-by-sectors-qnhs-q4.html), I covered detailed breakdowns in employment numbers changes across various sectors of the economy. Here, I will briefly identify sub-trends relating to aggregate data.

A caveat: per my discussion before, I will also report here numbers in employment ex-agriculture. In my view, it is questionable as to how agricultural employment is registered in the first place, since many/some of today's famers used to be construction sector employees or self-employed contractors. How many? We do not know. How many claimed unemployment in the past and now, having run-out of benefits, declared themselves to be farmers or farm employees for the purpose of optimising extraction of subsidies or supports? We do not know. Hence, I will omit farming employment from consideration in one sub-set of the aggregate figures (clearly labeled and identified below). This is done not because all of the employment in this sector is somehow 'bad' or 'unproductive' but because

  1. we do not know how much of this employment is real and of what quality, and
  2. employment in agriculture is different in nature (and in valued added) to employment in all other sectors of the economy (this is the reason why many other jurisdictions report non-farm employment numbers and/or private non-farm employment numbers).
Definitions for table and chart below:
  • Non-agricultural Private Sectors include all sectors, with exception of Agriculture, Forestry & Fishing, and Public & State-controlled Sectors Employment (as defined below)
  • Public & State-controlled Sectors Employment covers employment in Public admin & defence, social security (O), Education (P) and Human health & social work (Q). This grouping is not designed to measure public sector employment levels (I will blog on these later separately), but rather identify separately employment in the economy relating to sectors largely controlled by public sector and heavily influenced by state policies on employment and activity.
  • High-value added activities employment covers the following sectors: Information and communication (J), Professional, scientific & technical activities (M), Education (P), Human health & social work (Q), Financial, insurance & real estate (K,L)
Table below summarises changes on H1 2011 average and Q4 2013:

The claim is that there were 60,900 jobs added (employment created) in Q4 2013 compared to Q4 2012. Of these, slightly less than half were added in the private non-agricultural employment sectors (29,600), while Public & State-controlled Sectors employment grew by 4,500 and agricultural employment expanded by 26,800. The numbers are strong and positive.

High-value added sectors of employment showed weaker performance, adding only 12,100 new employees in 12 months through Q4 2013. This, of course, comes on foot of strong performance in 2012, as evidenced by the total number in sector employment rising by 23,600 between H1 2011 and Q4 2013.

Although it is unclear if they include any of the State Training Programmes participants (if they do, as we know they are excluded from unemployment counts), then the numbers are less impressive.

Dynamics across the categories are shown in the chart below:


Dynamics across all aggregates are positive, with exception of the Public & State-controlled Sectors where things are moving sideways. Not quite down significantly and not up. Pick up in non-agricultural private sector employment is weak and unconvincing for now, so it would be good to see steady gains over 2014 in this category.

One thing to keep in mind is that the claimed 61,000 new jobs created is a suspect claim for two reasons:
1) It is subject to modification on the basis of quality adjustments (in part, I will do this when I am reviewing full-time vs part-time employment figures; and in part due to agricultural employment issues highlighted above)
2) The impact of the State Training Programmes, which are for now unknown in terms of how they register in the above data
On the other hands, there have been new jobs added in both higher value-added sectors and in non-agricultural private sectors, as detailed above. This, undoubtedly is a good news.

Stay tuned for more analysis of QNHS data tomorrow.

Thursday, February 27, 2014

27/2/2014: Employment by Sectors: QNHS Q4 2013


Quarterly National Household Survey is out for Q4 2013. Here is the first post looking at the sectoral jobs distribution and jobs 'creation' or rather employment additions.

The next post will cover aggregate employment levels data.

Key to tables below: red denotes reduced numbers in employment in specific sub-sector/sector, green denotes increases in employment. In the tables, I reference current level of employment on H1 2011 average - the period when the current Government came to power.

Table 1:

As the above shows, there was a massive recorded increase in numbers in employment in agriculture. These numbers are driven by the unknown factors, as they are impacted by revaluations applied by the CSO. CSO detail the issues involved with this data in their notes: http://cso.ie/en/media/csoie/releasespublications/documents/labourmarket/2013/qnhs_q42013.pdf
so there is no need for me to go into deep explanations.

Outside Agriculture, Forestry & Fishing, there were modest y/y gains in Construction sector, totalling just 400 jobs. For all the reported activity in the sector - with investors flocking to our shores and building industry posting alleged revivals, there is preciously little to show here in terms of jobs creation since the current Government came to power. Still, good news is that employment is up y/y. May this be a trend, rather than a blip. Construction sector employment has been trending at around Q4 2013 levels since Q1 2011, showing no serious uplifts.

In contrast, Wholesale & Retail Trade, etc sector saw massive drop off in employment, down 3,000 in a year through Q4 2013. The sector is now at the levels last seen in Q4 2004, and Q2 2013 was the second lowest quarterly reading over the current crisis period.

Transportation & Storage sector is basically showing the same signs as Construction sector, with a small rise in employment of just 600 jobs in Q4 2013 compared to Q4 2012. The sector is still down on H1 2011. Q4 2013 marks the second lowest Q4 on record for the period of the crisis.

Accommodation & Food Services sector is gaining jobs at a nice pace. Employment is up 23,150 since H1 2011 and of this increase, 17,400 came in the twelve months through Q4 2013. This is an unambiguous positive, since the sector is now very close to regaining 2007 highs in employment.

Table 2:

As above shows, things are slipping somewhat in the Information & Communication sector, with employment gains since H1 2011 running at a a strong 7,250 on H1 2011, but employment levels down modest 700 jobs in Q4 2013 compared to Q4 2012. Still, Q4 2012 was the absolute record level for employment in the sector, so some retrenchment, especially mild, is ok. The problem, of course, is that this sector is the focal point of all the talk about Irish economy becoming a haven for ICT services jobs. The technical and specialist jobs in this area go into this category, while business services jobs are absorbed into the next two categories.

The above explains why we are witnessing a significant rise in employment in Professional, Scientific & Technical activities sector, where employment rose 11,500 in Q4 2013 compared to H1 2011, and the rise was even sharper (by 13,000) in 12 months through Q4 2013. Very good signal, of course, is that employment in this sector of activities was on a strong rise now since Q4 2011 and we are now just 2,900 jobs shy of the all-time high posted in Q2 2008.

Things were, however, more mixed in Administrative & Support Services sector, where Q4 2013 employment recorded a decent rise of 1,300 jobs compared to Q4 2012, but still posted a loss of 2,600 jobs compared to H1 2011. We are currently running on flat trend from Q4 2009-Q1 2010 albeit with high volatility in the series.

Public Administration & Defence have been shrinking in employment levels, with employment decline of 1,000 in 12 months through Q4 2013. Over the period from H1 2011, employment in this sector is down 6,800, which sounds impressive, as long as we assume that there was no reclassification of employees from this category to other state-controlled or state-related areas, such as Health and Education, Transport etc. I will blog on public sector employment numbers separately, so stay tuned for more analysis.

Education has returned higher employment in Q4 2013 compared to Q4 2012 - a rise of 1,600, but the levels of employment remain lower (by a very small number of 250) compared to H1 2011. It would be interesting to know if the latest changes are driven by private employment, part-time employment or full-time public employment. Alas, we do not have that information.

Table 3

As with Education, Human Health & Social Work also posted an increase in employment over 12 months through Q4 2013, rising by a very significant 3,900. Despite all the 'cuts' talk, sector employment is now 10,400 ahead of where it was in H1 2011.

The chart below summarises the trends in Human Health & Social Work, Education and Public Administration & Defence:


Back to table 3 above:

Industry employment (excluding Construction) rose strongly, some 6,400 in 12 months through Q4 2013, and employment growth is more moderate, at +4,650 when compared against H1 2011 levels. This is good news and confirms my thesis that we are witnessing some (albeit still fragile) organic recovery in the sector.

Services sectors on the aggregate basis posted a rise of 29,300 jobs in 12 months though Q4 2013 and there was a very similar increase on H1 2011 figures.

However, there was strong contraction in employment in the Financial Services, Insurance & Real Estate sector, with employment down 5,300 on H1 2011 and 5,700 on Q4 2012.

In the next post, I will take a look at the Total Employment, Non-Agricultural Employment, Public Sector and State-Controlled Sectors Employment and other core aggregates.

Monday, February 10, 2014

10/2/2014: Irish Services & Manufacturing PMI, January 2014


While on the topic of PMIs (see Construction PMIs update here: http://trueeconomics.blogspot.ie/2014/02/1022014-ulster-bank-construction-pmis.html), let's update also Manufacturing and Services PMIs data.

Services:

  • January Services PMI index slipped slightly to 61.5 from 61.8 in December 2013. The deterioration was not material from statistical point of view, so the index remains effectively at the high level for the last 12 months.
  • 3mo MA through January 2014 was 60.1 - above 56.2 in the same period through January 2013, and ahead of 3mo MA through November 2013. This is good news as it allows for some correction in monthly series volatility.
  • The series are above their crisis-period trend and are still trending up.
  • The index is now above 50.0 since August 2012 - a solid performance, with the rates of growth being on average above 60.0 since at least July 2013.


Manufacturing: 

  • January Manufacturing PMI index also moderated to 52.8 from 53.5 in December 2013, with this moderation being significant, albeit shallow.
  • On a 3mo MA average, index is at 52.9, which is ahead of 51.4 in the same period of 2013 and is ahead of the 3mo MA through November 2013.
  • The index readings have rested above 50.0 nominally since June 2013, although they are significantly (statistically) above 50.0 for a shorter period of time, from somewhere around September 2013.




Overall, January posted slowdown in both indices growth, and 3mo MA for growth rates in the index is now negative for Manufacturing, and moderately positive for Services.



Longer-range good news is highlighted in the next chart, showing that in January 2014, levels of two PMIs were consistent with expansion across both sectors, contrasting the situation in January 2012 and January 2013.



Top level conclusion: The numbers show a good start to 2014, but Manufacturing remains a weaker point for the economy. Given monthly volatility in the indices, we need to see more data from PMIs to call the 2014 trends


As usual, the caveats apply: I have no data on sub-components of both PMIs - the core information that is no longer being made public by Investec and Markit (the publishers of the two series). Unfortunately, this means I no longer cover the two organisations' analysis of the components as these are unverifiable and statistically no longer testable.

Wednesday, January 8, 2014

8/1/2014: Weakness in Retail Sales extended into November 2013


Retail sales data was out for November 2013 today. Here's the top of the line analysis:
  • On seasonally-adjusted basis, core retail sales (ex-motors) posted a slight rise in value of sales from 95.5 in October to 96 in November. 
  • Year-on-year value of retail sales (ex-motors) are down 0.1%.
  • Core retail sales in volume terms stood at 101.4 in November, up of 100.1 in October.
  • Year-on-year volume of retail sales index rose 1.6%
  • Meanwhile, the ESRI Consumer Confidence indicator declined to (still massively optimistic) 71.0 in November from 76.2 in October. A year ago, the CCI was at 63.8.

3mo period through November 2013 compared to 3mo period through August 2013:
  • Value index marginally down at 95.6 against 96.1 prior;
  • Volume index marginally up at 100.5 against 100.4;
  • Consumer confidence index up robustly at 73.4 against 68.5 prior

Thus, in the nutshell, Consumer Confidence rose over the year, while retail sales  basically stagnated. 


My own Retail Sales Activity Index:
  • On 3mo basis up at 105.6 in September-November 2013 against 103.9 in June-August 2013;
  • Up 0.54% mom - in line with 0.52% rise in Value index and up 2.75% y/y


It is worth noting that stripping out motor trade, automotive fuels and bars,
  • Value of retail sales fell 0.98% in the 3mo through November compared to 3mo through August
  • Volume of retail sales rose 0.06% in the 3mo through November compared to 3mo through August


The above suggests that p[rice reductions in there entail sector in September-November 2013 had no effect on increasing retail sales, compered to the 3 months of June-August 2013.