1/7/2013: Irish Manufacturing PMI: June 2013

Irish Manufacturing PMI is out today and I can't really report much on the subject - the Investec - Markit continue to put out qualitative analysis in place of what used to be very informative press releases.

The PMI data is seasonally adjusted, which makes y/y comparatives slightly questionable, while normal volatility makes m/m comparatives pretty much meaningless. Note: despite the seasonal adjustment data remains Laplace-distributed. In the past, it was possible to make some educated guesses as to the underlying drivers of the PMI by looking at trends in components. Now - it is impossible.

But ok, let's deal with the headline PMI alone.

The headline PMI reading is not as ugly in June as it was in March and April (PMI average at 48.3), but not pretty either.

We have a statistically insignificant rise in the overall index reading of 0.6 points (bi-directional standard deviation for this data is at 4.37 for full sample, 4.28 since 2000 and 5.21 since 2008).

The increase brings us notionally above 50 to 50.3, for the first time since February 2013, but
1) This is not a reading that is statistically significantly different from 50.0 (STDEV is at 2.19 for difference from 50 and the skew is -1.46, so 0.3 is not significant)
2) Current reading still remains consistent with negative trend set on around 12 months ago. Next 1-2 months will be critical in either confirming the trend or potentially signalling an inflection point. Then again, next 1-2 months will be peak of summer, and will be unlikely to tell us much.
3) 50.3 reading in June is identical to January 2013 and is below 12mo MA of 50.9, and is about identical to the 3mo average through March 2013 at 50.1. 3mo average reading through June is below 3mo averages through June in every year 2010, 2011, 2012.

Core conclusion: output did not, in any normal statistical likelihood, return to growth yet, although PMI reading did come to around 50 from the upside (50.3)… it was also around 50 back in May (49.7) but on the downside.

Per Investec, there was "a further reduction in new orders, although the latest decrease was only fractional, and the slowest in the current four-month period of decline. New export orders, meanwhile, fell at a faster pace than in May." We, of course, have no idea just how far these reductions have taken the two sub-indices, because Investec and Markit are no longer giving us actual sub-index readings.

Charts on dynamics:

1/5/2013: Not pretty and getting uglier: Irish Manufacturing PMI April 2013

Another unpleasant print of NCB Manufacturing PMI for Ireland was out today, marking broad-based, deepening contraction for the second month in a row and for the third month in last four.

Here are top figures:

Overall Manufacturing PMI declined to 48.0 in April 2013 from 48.6 in March, marking second consecutive monthly fall and reaching the lowest level since September 2011. It is worth noting that the current reading is statistically significantly below 50.0, but that the last two months of decline came on foot of 12 months of consecutive expansions through February 2013. Nonetheless, 3mo average through April 2013 is now down to 49.4 against 3mo average through January 2013 at 51.4, and current 3 mo period marks the lowest average reading compared to same period 2010-2012.

Overall, recovery was short, shallow and predominantly trending down, with most significant sub-indicators now below 50. As chart above shows:

• Output index contracted sharply from already statistically significant contraction of 48.1 in March 2013 to 46.5 in April. 3mo average through April is at 48.6, with April reading being the lowest recorded since August 2009 and previous 3mo periods average through January 2013 at 52.2, a 3mo average swing of massive 5.7 points. Current 3mo average is the lowest (and the only one below 50) for any same-period reading from 2010 through 2013.
• New Orders sub-index fell to 48.4 from 49.1 in March, with 3mo average through April at 49.4, below 3mo average through January 2013 at 50.8. New Orders are currently running at the fastest rate of contraction since January 2012.
• New Export Orders index posted slower rate of contraction at 49.2 in April, compared to brisk decline of 47.6 recorded in March 2013. 3mo average through April 2013 is at 49.0 against 3mo average through January 2013 at 52.2. In Q1 2013, New Export Orders index was running on average at 49.53, so the current index reading signals continued slowdown on the Q1 already poor showing, same as with New Orders sub-index.

Structurally over time, both New Orders and New Export Orders are on downward momentum sub-50 and are seeking confirmation to the downside:

Input prices and output prices are trending down, but inputs are still inflating, while outputs are still deflating, which means profit margins continue to shrink, albeit at moderating pace, compared to March 2013:

Of course, profit margins here are relative, since much of our Manufacturing PMI is skewed to reflect MNCs activities. These activities - as I wrote before - are predominantly on transfer pricing side, so booking higher inputs costs against lower output costs improves tax arbitrage.

In the chart above, Employment sub-index posted a worrying two-months consecutive slip:

• Employment sub-index fell to 46.9 in April from already steeply contractionary 47.2 in March. April marks the lowest sub-index reading since September 2011. 3mo average through April is at 48.9 against 3mo average through January at 52.1 and Q1 average of 49.8. Reminder: Q3 and Q4 2012 saw employment sub-index averaging 52.8 and 52.9 respectively, which implies a swing of 5.9 points to April 2013 from the end of 2012.

Lastly, my own Composite Current and Forward indices, re-weighting exports contributions and profitability conditions into overall PMI:

• Composite Current conditions indicator fell to 47.2 in April from 48.3 in March, with April reading statistically significantly below 50.0. The deterioration is broad on 3mo average basis and quarterly averages basis. The index is now at the lowest reading since August 2009!
• Composite Forward conditions indicator posted another (second consecutive) monthly contraction at 48.8 in April, which is marginally shallower than 48.4 contraction in March 2013. The reason for this is that the index is clearly tracking some of the forward activity, suggesting that conditions will ease slightly in months to come, but will remain in the 'negative headwinds'.

With both Current and Forward Composite Indices tracing close to (and even breaking) the lower bound of statistical significance, Irish Manufacturing activity seems to be heading for some rougher seas in months ahead. Granted, volatility can easily return things back above 50, but the dynamics overall are not pretty.

3/4/2013: Irish Manufacturing PMI: March 2013

Manufacturing PMI data from NCB and Markit released yesterday was a bit of a disaster, mitigated only by the fact that Ireland's performance was in line with the abysmal reading for the entire euro area.

Headline seasonally adjusted Manufacturing PMI fell from 51.5 in February (indicative of a reasonably marked expansion, albeit still not statistically significant) to 48.6 in March (statistically not significant contraction). The swing of 2.9 points was the largest since July-August 2012. This was the first sub-50 reading in PMI since February 2012.

12mo MA is now at 51.4 against 6mo average of 51.1. 3mo MA is running at 50.1 and is substantially down on 3mo average through December 2012 (52.0). This compares favourably to 49.8 3mo average through March 2012, but is well below 56.1 average for 3mo period through March 2011 and marginally ahead of 3mo average through March 2010 (49.9).

Index volatility is running well above historical levels at 2008-present stdev at 5.33 against historical stdev of 4.40.

Output sub-index fell from 51.3 in February 2013 to 48.1 in March 2013, marking the lowest reading since January 2012 and the first sub-50 reading since April 2012. 12mo MA and 6mo MA are both at 51.7, with 3mo MA at 50.3 against previous 3mo MA at 53.1.

New orders sub-index also fell below 50 line with February 50.8 weak expansion slipping into contraction territory at 49.1 in March. Once again, this was the weakest reading since January 2012.

New Export Orders came in at 47.6 - a sharp contraction and a massive fall on 50.1 in February, signalling the worst performance since August 2009. 12mo MA is now at 51.9, with 6mo MA at 51.0 and 3mo MA at 49.5 (previous 3mo MA was at 52.5, implying a 3.0 point swing down). Current reading is statistically significant sub-50 reading.

As you know, I compute current and forward-looking composite indices of activity.

Current Composite PMI reading is at 48.3 in March, down from 51.4 in February and marks the lowest reading since January 2010. Forward Composite PMI reading is at 48.4 - the worst performance since December 2011 and down on 50.5 reading in February.

Output prices fell at 48.2 in March, same as in January and down from expansion at 51.2 in February 2013. Meanwhile, input prices inflation moderated, but remained robust at 54.8 in March, down from 57.1 in January and February. Thus, overall profitability fell. In last 24 months, profitability rose in the sector in only one month.

Employment fell sharply to 47.2 in March against expansion of 52.7 in February. March reading was the lowest since October 2011.

Overall, the PMI for manufacturing sector was a disaster!

6/2/2013: Irish Manufacturing PMI - January 2013

Last night I wrote briefly about the Services PMI for January for Ireland (see post here and an added post on the longer term link between PMI and Services Index here). Going over the database, however, made me realise that I have not posted on the latest Manufacturing PMI figures for January, so correcting this, here's the analysis.

Headline seasonally adjusted Manufacturing PMI posted a decline from 51.4 in December 2012 to 50.3 in January 2013, leaving the index notionally above 50.0 line for 11th month in a row. Alas, 50.3 is not statistically significantly different from 50.0 and in total out of the 11 months of consecutive notional readings above 50, in reality only 3 months posted readings that are significantly distinct from 50.0 zero-growth line.

Dynamics are flat at just around 51.5 (also not statistically distinct from 50.0), with 12mo MA at 51.5, 3mo MA at 51.4 and previous 3 mo MA at 51.6. This, however, compares relatively positively with 3mo MA through January 2012 (48.5) and 3mo MA through January 2010 (48.6) although the current 3mo MA reading is below 53.1 reading for 3mo MA through January 2011. 6mo MA is 51.5.

In brief - growth is sluggish and lacking a catalyst.

Charts:

Per above, Output index posted a slight rise in headline reading from 51.2 in December to 51.5 in January, marking 9th consecutive month of above 50 notional readings, with just 4 of these months posting readings statistically consistent with being above 50.0. 3mo MA was at 52.2 in 3mos through October 2012 and is at 52.2 in 3mo through January 2013. It is bang-on in line with 12mo MA of 52.1 and is identical to 52.2 6mo MA.

New Orders sub-index posted surprise contraction to 49.5 (not statistically distinct from zero-growth, so a very shallow contraction if any) in January from shallow growth of 50.9 in December. 12mo MA is at 52.0, with 3mo MA through January 2013 at 50.8 and 3mo MA through October 2012 at 52.3, marking a clear slowdown in growth over the last 6 months. That said, January 2013 was the first sub-50 reading in the series since January 2012.

New Export Orders posted slower rate of expansion at 50.9 in January 2013, down from 53.6 in December 2012. Again, as above, 50.9 is not statistically different from 50.0, although 53.6 was clearly statistically above 50.0. January 2013 reading was the weakest in 4 months and the second weakest in 11 months. 3mo MA through January 2013 is at 52.2, above 51.2 3mo MA through October 2012, 6mo MA at 51.7 and 12mo MA is at 52.5, so by all averages, January came in relatively weak.

Other series summed up in the charts below:

Output prices posted a clear decline in January 2013 (48.2) after posting a mild expansion (and a surprise one) in December 2012 (51.3). Overall, in last 24 months, only 9 months posted notional above 50.0 readings, when it comes to output prices. Meanwhile, input prices continued to inflate, with index reading of 57.1 in January 2012 being somewhat lower than 59.9 in December. In last 24 months, there was only one instance when input prices inflation was negative. All of which does not bode well for profit margins: in 3 mo through January 2013, average input prices inflation was consistent with 58.7 and in 3mo through October 2012 it stood at 59.4. At the same time, output prices were contracting by 49.7 in 3mo through January 2013 and were expanding at a slower pace than inputs costs were inflating (51.7 vs 59.4) in 3 months through October. In other words, profitability has been shrinking, on average over last 6 months and indeed over the last 12 months.

Now onto composite measures of current and future activity. These are computed based on my own formula, so not a part of NCB-released data. The Current Composite index is based on a  weighted average of Output and headline PMI index, relating current PMI to Output, as opposed to changes in stocks of goods and purchases orders. The Forward Composite Index is based on a weighted average of New Orders and New Export Orders, weighted relative to each series correlation to headline PMI. As such, both indices attempt to remove impact of temporary factors on underlying activity.

Current Composite Manufacturing PMI (CCM index) fell from 51.3 in December 2012 to 50.9 in January 2013, with overall notional levels above 50 recorded now in 9 consecutive months. However, statistically, the CCM Index was above 50.0 in only four out of the last 12 months. Forward Composite PMI (FCM index) also slipped in January from 52.2 in December 2012 to 50.2. Above 50.0 notional readings were now recorded in 11 consecutive months, although only four months posted readings statistically above 50.0.

On the net, the indices mark significant slowdown in current and forward activity, although current readings are consistent with progressing weak recovery (statistically indifferent from stagnation). Given overall global improvements in sentiment and trade, this can represent simply a lagging effect to global growth (upside potential) and / or drag on Irish activity from the Euro area and the UK economies weaker-than-global performance (downside potential).

4/1/2013: Irish Manufacturing PMI: December 2012

The latest Manufacturing PMI for Ireland, released this week by the NCB, reflect a number of ongoing changes that can lead to a confirmation of the new trend toward slower expansion for Q4 2012 – Q1 2013. At the same time, the overall series continued to post expansion, in contrast with all euro area PMIs – a rather impressive performance.

Hence, my top conclusions – based on the detailed analysis below – are:

• Irish Manufacturing continued (albeit slowing in the rate) expansion reflects impressive robustness of the exports-driving MNCs, while
• The overall strong and persistent headwinds of slower global trade flows growth and the contractions in trade within the euro area are starting to feed through to Irish manufacturing sector – a trend that can prove to be a significant drag on growth in Q4 2012 – Q1 2013.

Now to the detailed analysis:

Top line reading for PMI came in at 51.4 in December, down from 52.4 in November. December reading printed exactly at 12mo MA and below 6mo MA (52.1) and 3mo MA (52.0). 3mo MA of 52.0 for October-December is down on 52.2 3mo MA for Q3 2012, but is above Q2 2012 average (51.5) and Q1 2012 (49.8). Q4 2012 average is bang on at Q4 2010 average and ahead of 49.1 average for Q4 2011. The December reading was the lowest in 4 months.

All of this implies a weakening growth momentum with output index peaking, for 2012 at 53.1 and 53.9 in June and July, afterward slipping toward 51.7 average reading. It is worth noting that a reading above 53 is statistically significantly different from 50.0, while a reading at or below 52.2 is not significantly different from 50.0.

Output PMI fell from 54.4 in October to 53.8 in November and to 51.2 in December 2012. December 2012 reading was the first statistically insignificantly different from zero-growth 50.0 in 3 months and marked seventh month in 2012 when growth was statistically at or below 50.0. At the same time, December reading was the 8^th consecutive month that output index printed above 50.0 level. All of which only makes sense when one recognizes that Output index is strongly volatile. For example, historical STDev for overall PMI is at 4.44, while STDev since January 2000 is at 4.36 and the crisis period STDev since January 2008 is at 5.43. In Contrast, Output PMI STDevs were 5.14, 4.94 and 6.04 respectively.

At 51.2, December output reading was below 12mo average of 51.7, and below 6mo average of 52.6. However, on a positive side, and statistically significantly, Q1 2012 index averaged 50.2, rising to 51.4 in Q2 2012, followed by 52.1 in Q3 and 53.1 in Q4.

While Output slowdown was marked only in December, fall off in the New Orders sub-index was much more pronounced and is signaling a longer term trend down. New Orders reading came at 50.9 (still above the 50.0 libne, but not statistically significantly different from 50.0) down from November reading of 52.1. New Orders activity peaked in 2012 in June-July and has fallen since. At the same time, in simple level terms, the index was for the tenth consecutive month above 50.0.

12mo MA for the New Orders sub-index is at 51.8, while 6mo MA is at 52.6. Q1 2012 average was at 49.9, Q2 at 52.0, Q3 at 53.3 and Q4 2012 came in at 51.9.

In contrast with sluggish bouncing along the zero growth line in the New Orders series, New Export Orders series posted surprising rise in December, reaching 53.6 (statistically significantly above 50.0) from 52.1 (not statistically significantly different from 50.0). This marked the highest reading in the series since July 2012 and allowed the sub-index to regain territory lost since August 2012. Per survey respondents, the core driver for new export orders was rising demand from the US.

New Export Orders have been steady on a gentle upward trend – based on averages and correcting for some shorter term volatility – Q1 2012 average was at 51.9, Q2 and Q3 2012 at 52.8, Q4 at 52.5. Thus, 12mo MA is at 52.5, very close to 6mo MA of 52.7.

Other subcomponents:

I will deal with employment and profit margins conditions once I complete analysis of the Services PMI in the next few days, so stay tuned.

3/12/2012: Ireland's Manufacturing PMI for November 2012

NCB Purchasing Manager Indices for Manufacturing for Ireland are out this morning with a deserved upbeat soundings on foot of the core data showing continued growth in the sector. Here are some details, both worth a positive overall note and some warning signs of potential tightness ahead.

Business conditions continued to improve in the Irish manufacturing sector during November, marking the ninth consecutive month of such increases, though there were slower rises in output and new orders.

Overall PMI was running at 52.4 in November, slightly up on October 52.1. November reading was the highest since July 2012. Strictly-speaking, both October and November indices were statistically indistinguishable from 50.0, however, with the last index reading that was statistically significantly above 50.0 was July 2012 and the last time this happened before then was April 2011.

Not to rain too much on the parade, 12mo MA through November 2012 is at 51.1 and 6mo MA is at 52.4, both encouraging. 3mo MA through November is 51.2 and this is behind 3mo MA through August 2012 which as 52.6. In other words, last 3mo activity does not seem to signal any significant improvement on June-August period, although both 3mo averages are ahead of 50.9 reading that represents the 3mo average between March and May 2012.

Likewise, looking at actual quarterly averages: Q1 2012 came in at 49.8 (contraction), Q2 at 51.5 (expansion at shallow rates), Q3 at 52.2 (another shallow expansion) and Q4-to-date at 52.25 (no material improvement on Q3).

Let's take a look at core subcomponents:

• Actual Output levels expanded in November at 53.8, down on 54.4 expansion in October, but up strongly on output growth of 51.0 and 51.3 recorded in August and September. 12mo MA is at 51.5. Both October and November readings were significantly above 50.0 line - adding some statistical support to the output growth signals. 6mo MA is now at robust 53.3 and 3mo MA is at 53.2, identical to the 3mo MA through August 2012. Q4-to-date reading is at strong 54.1 and up on 52.1 average for Q3 2012, 51.4 average for Q2 2012 and 50.2 average through Q1 2012. Good news, despite slower growth rate recorded m/m.
• New orders also moderated the rate of expansion to 52.1 in November, from 52.7 in October. 12mo MA is now at 51.4 and 6mo MA at 53.1, the latter being statistically significantly different from 50.0. 3mo MA is at 52.4 down from 53.7 3mo average through August 2012. On quarterly basis, Q1 average stood at 49.9, Q2 2012 average rose to 52.0, with Q3 2012 average hitting 53.3, and Q4-to-date average sliding back to 52.4.
• Growth in new orders seemed to have been driven by growth in export orders, up from 51.8 in October to 52.1 in November. Both months expansions were statistically insignificant. New export orders improvement, however, in m/m terms was more significant than improvement in overall new orders. 12mo MA for export orders stands at 52.3, with 6mo MA at 52.5. 3mo MA at 50.8 - signaling weakness in the overall sub-index performance, against 3mo MA of 54.2 recorded in June-August 2012. On quarterly basis: Q1 2012 average reading was 51.9, rising to 52.8 in Q2 and Q3, before sliding to 52.0 in Q4-to-date.

 Per Markit/NCB release: "According to respondents, slower growth of new business enabled manufacturers to work through outstanding business. Backlogs of work decreased for the twenty-first month running, albeit at a reduced rate." This is illustrated below:

As you know, I usually run more detailed comparatives on input/output prices and profitability in a separate post, once Services sector data comes in. But some reflections here:

• Output prices contracted in November, posting a reading of 49.7 down from 51.7 in October. This is the first contraction in the series since August 2012. Overall, trends in output prices are not encouraging for Irish manufacturers. 12mo MA is at 49.1, with 6mo MA at 50.3. Q1 2012 average is at 47.3, Q2 2012 average at 49.4 and Q3 average at 50.2, while Q4-to-date average is 50.7.
• Meanwhile, Input prices continued robust inflation trend set o since August 2012. In November, input prices subindex stood at 59.0 down slightly on 60.7 in October and 60.6 in September. 12mo MA is at 58.0, 6mo MA at 55.8, 3mo MA through November is at 60.1 and previous 3mo MA through August was at 51.4. In quarterly averages terms, Q1 saw average subindex reading of 60.4, Q2 at 57.9, Q3 at 55.1 and Q4-to-date at 59.9.
• Continued widening gap between input prices (cost) inflation and output prices (revenue) deflation suggests two possible pressures in the sector: (1) rising transfer pricing - as opposed to actual activity - in the sector by the cost-base-driven MNCs, and (2) shrinking profit margins for Irish firms and profit-base-driven MNCs.

Lastly, per chart above, employment:

• Employment subindex expanded to 53.5 in November, a robust rise on 51.9 in October, but behind 54.1 reading reached in September. Overall, employment index is now ahead of 50.0 line for nine consecutive months. 12mo MA is at 52.3, 6mo MA at 53.3. 3mo MA through November is at 53.2, slightly down on 53.4 3mo MA through August 2012. In quarterly terms, Q1 saw subindex average 50.0, Q2 2012 - 54.4, Q3 2012 - 52.8 and Q4 2012-to-date averages at 52.7. In other words, there seem to be robust hiring signal coming from the sector in the last 9 months.

Net conclusion: good PMI readings, especially considering that Euro area continues to tank and global trade slowdown is yet to be reversed. Some tightness on profit margins and weakening new orders growth rate are to be watched. However, the two warning signals above are likely to be offset by the stocks rebuilding in months ahead, should new orders hit a slowdown.

Updated:
Manufacturing PMIs across the euro zone contracted for a sixteenth consecutive month in November, with last month's reading at 46.2, up on 45.4 in October. November marks the slowest pace of contraction in eight months, but the downturn remains strong. New exports continued decline, while Italy PMI is down to a 3mo low of 45.1 and Spain is at 45.3.


The Markit/HSBC China Manufacturing PMI for November rose to 50.5, up from 49.5 in October hitting for the first time in 13 months the 50.0 mark.

3/9/2012: Ireland's Manufacturing PMI for August

Today's release of the NCB Manufacturing PMI data for Ireland for August 2012 came in with both a positive and a negative surprises. The positive side of the news is that the headline index did not dip below 50 (contraction territory) but stayed at 50.9 in August, down on 53.9 in July, but above 49.7 in August 2011. In other words, the rate of Manufacturing sector growth has slowed down markedly, but remained positive in August.

The slowdown is significant, however, with current reading (50.9) not statistically distinguishable from zero growth level of 50.0, against statistically significant expansion recored in July.

Here is core stats summary:

• Headline seasonally adjusted PMI is now running at below 3mo MA (52.6), and 6mo MA (51.8). However, thanks to July reading, Q3-to-date average is at 52.4 (statistically above 50.0) and well ahead of 51.5 in Q2 and 49.8 in Q1. 
• August marked the 6th consecutive month of above 50 readings.
• New Orders sub-index also fell in August from 55.8 in July to 51.8 in August. Again, August reading was not statistically significantly different from 50.0. 3mo MA is now at 53.7 and 6mo MA is at 52.7. Q3 to-date average is 53.8 and this is well ahead of Q2 2012 average of 52.0 and Q1 2012 average of 49.9.
• New Export Orders sub-index also posted moderation in growth from July 56.7 to August 53.4, although 53.4 remains a solid signal of expansion. August now marks 6th consecutive month of the sub-index above 50 readings. 3mo MA is at 54.2 and close to 6mo MA of 54.0. Q3 2012 average to-date is at brisque 55.1 against Q2 2012 average of 52.8 and Q1 average of 51.9. 
• One has to keep in mind that the above performance puts Irish manufacturing sector activity well ahead of the euro zone peers and our exporting performance well above the entire EU member states' performance.

Chart to illustrate:

Output sub-index confirmed the above trends, slipping from 54 in July to 51 in August. Again, expansion is not significantly different from zero, but still good to see the index staying above 50 in level terms. 3mo MA is at 53.2 and 6mo MA at 52.0. Quarter to quarter changes are: Q1 2012 average of 50.2, Q2 2012 average of 51.4 and Q3 2012 average of 52.4.

Chart below snapshots core series trends over shorter horizon:

Chart below shows time series for other sub-indices.

Quick synopsis of changes in prices and employment. As usual, I will be doing more detailed analysis of profitability and employment after we have Services PMI data as well, so stay tuned:

• Output prices have continued decline, albeit at slower pace than in July, while input prices returned to rapid inflation (56.8 in August from 47.8 in July).
• 3mo MA for input prices is now at 51.4 against 48.6 3moMA for output prices. 
• This points to shrinking profit margins. However, the pace of margins contraction is now slower than in Q1 and Q2.

• Manufacturing sector employment posted another (6th consecutive monthly) expansion in August, though the rate of growth in employment has moderated from 53.1 in July to 51.1 in June. Q3 average-to-date is at 52.1 which is down on 54.4 for Q2. 

So overall, the data coming out in August is a mixed bag. Comparative to the euro area peers, manufacturing in Ireland is doing as well as can be hoped for. Alas, the rates of economic growth we require to sustain our debt deleveraging are hardly benchmarkable against our peers. And on that side, things are not encouraging. 

Let's wait for Services data next...

2/8/2012: One hell of a chart!

One hell of an awesome chart, folks:

Clearly shows the strong, sustained break-out in Irish manufacturing PMI which started around April 2012, ending the period of sub-50 average readings between June 2011 and March 2012. And this amidst a massive slowdown in global trade and euro area economies.

1/8/2012: Manufacturing PMI for Ireland: July 2012

In the previous post I highlighted the relative performance of Irish manufacturing PMI for July compared to other countries (link here). In this post, let's take a look closer at the Irish Manufacturing data.

July Manufacturing PMI for Ireland came in at 53.9 - up on 53.1 in June, signaling strong and accelerating expansion in the sector. This marks the strongest reading in 15 months (PMI registered 56 in April 2011). More significantly, PMI has now been above 50 (expansion territory) for 5 consecutive months.

Dynamics are also encouraging: 12mo MA is now at 50.2, 3mo average through July is at 52.7 up on 3mo average through April 2012 of 50.4, up on comparable period of 2011 (49.4) and even on same period of 2010 (53.1). 6mo MA is at healthy 51.6. All readings are above historical average of 51.0.

However, headline PMI is still statistically not significant as chart below illustrates:

One positive in the above is that the series on core PMI, Output, New Exports Orders and New Orders have broken out of the flat pattern set June 2011 and are now expanding at significantly higher rates.

• New orders sub-index rose to 55.8 - very strong reading, given the 12mo MA of 50.2 and statistically significant. This too marks the highest reading since April 2011.
• Output sub-index is now at 54, down slightly on 54.6 in June, but still strong positive reading and also statistically significant. Output has now expanded for three consecutive months and is running ahead of 12mo MA and 6mo MA. 3mo average is ahead of previous 3mo average. All dynamics are strong and positive.
• New exports orders sub-index posted massive jump to 56.7 from 52.5 - marking the first statistically-significant reading in 4 months. This sub-index is now in expansion mode for 6 consecutive months.

Alas, the rest of the series are less impressive:

What worries me in the data above, though the word 'worries' is a bit too strong here, given the impressive numbers generated, are the following trends:

• Output prices have fallen 47.0 while input prices have declined 47.8 in July which suggests that profit margins have dropped.
• Increased production levels drove down the backlogs of work, despite increases in new orders.
• Increased output also drove up increases in purchasing of inputs (imports).

7/6/2012: Irish Services PMI - May 2012

­­In the previous post (link here) I covered manufacturing PMI, showing a slight lift up in the growth rate from 50.1 in April (stagnant economy reading) to 51.2 in May (sluggish, but growth). More importantly, the 3mo average for March-May 2012 stood at 50.9 (weak expansion) compared to 48.9 average for December 2011-February 2012 (contraction).

Today’s Services PMI paints a weak picture in the other 48% of the private sectors economy in Ireland.

Headline Services PMI fell to 48.9 (contraction) in May from 52.2 in April. This marked the first month of sub-50 reading since January 2012. 12mo MA is at 51.2 and 3mo MA is at 51.1 in line with 12mo MA, slightly below 51.7 average for 2011.

This suggests that 5 months in 2012, growth conditions remain challenging. January-May 2012 average reading is 51.0, which, if sustained through 2012 will imply Services sectors growth of close to, but worse than a 2.15% real contraction in Services in 2011. Not exactly what I would call good news.

Of course, there are loads of various caveats to the above analysis, so don’t take it as some sort of a forecast.

New Business sub-index deteriorated from 52.7 in April to 49.6 in May, posting first usb-50 reading since January 2012. 12mo MA for the sub-index is now at 50.1, in effect implying that new business activity has been stagnant over the last 12 months. 3mo average is at 51.5 and the previous 3mo average was 50.2, some improvement on December-February period is still present. Good news, current 3mo average is ahead of same period averages for 2010 and 2011.

In line with broader indices, employment sub-index has fallen to 49.1 – returning to sub-50 level after March and April departures from the trend. Thus, 12mo MA for employment sub-index is now at 48.0 firmly signaling contraction in jobs in the sector. 3mo MA is at 50.3 owing to 51.9 spike in March, while previous 3mo average is 46.6. Current 3mo average and May level reading are both below the 3mo average for the same periods in 2011. 

Meanwhile, the giddy happiness signalled by the Services sector Confidence indicator bubbled up from 64.1 in April 2012 to 64.3 in May. The indicator runs on a silly scale well off the 50=neutral stance. Give you an example, in 2010, the indicator averaged around 66.7 and in 2011 it averaged 64.8. In both years, Irish Services sectors were, ahem… in a recession.

Output prices continued to fall, with the rate of decline accelerating to 44.4 from 44.9 between April and May. 3mo average through May is now at 45.4 and the previous 3mo average is 45.7. This marks continuation of below-50 readings in output prices since July 2008. Meanwhile, input costs rose at a faster pace (51.4) in May than in April (51.0), with 3mo average through May at 52.5, against previous 3mo average of 54.3.

Predictably, profitability was shot, again. Profitability sub-index fell to 45.8 in May from 47.5 in April.

More on profitability and employment in the following posts as usual.