5/2/2013: Irish Services PMI for January 2013

The latest data from Services PMIs - released this am - is full of positive news. In this light, it is both hard and, perhaps, unjust to rain on the parade with detailed analysis of hypotheticals. But, alas, this is what needed for the dose of reality check.

Before we do, here are the straight forward numbers.

Overall headline Business Activity index rose to 56.8 in January 2013 from seasonally adjusted 55.8 in December 2012 - a strong level of activity that marks the highest index reading for any month since August 2007 when the index reached 57.0.

This is the good bit. And it gets even better when we consider 3mo MA to smooth out some of the monthly index volatility: current 3mo MA stands at 56.2, ahead of previous 3mo MA through October 2012 of 53.9. Year ago, 3mo MA was at contractionary 49.8 and in 2011 the same period 3mo MA was at 50.7 against 2010 3mo MA through January reading 46.5. In other words, we have solid increase in 3mo MA, which is more sustainable reading than monthly series.

12mo MA is at robust 53.0, implying that last 6 months have seen, on average, stronger activity in the sector (55.1) than February-July 2012 (50.9). Also good news.

Chart to illustrate:

Per chart above, Business Activity expansion was backed by New Business Index growth. New Business Index reading reached 56.6 in January, up on already strong reading of 56.4 in December. However, unlike overall activity, new business expansion was not as dramatic in historic terms, with January marking third fastest rate of expansion in 6 months. 3mo MA through January 2013 stood at 56.5 - faster than 54.5 3mo MA through October 2012. In 2012, same period 3mo MA was 49.9 and in 2011 it was 47.6, while in 2010 it was 46.8, which means that the last 3mo MA expansionary reading (and strong one at that) is the first expansionary reading in 4 years.

12mo MA for New Business Activity is now at 53.4, with last 6mo MA at 55.5 against first 6mo MA at 51.3, suggesting that New Business Activity is a major driver behind Overall Business Activity acceleration in the last 6 months.

Chart below shows snapshot of both indices over shorter period of time, allowing for better understanding of the underlying short term trend:

The close coincidence in series since November 2011 is indicative that sector activity is gaining momentum on foot of New Business Orders (as opposed to jobs inventories and backlogs) and trend acceleration since July 2012 also shows sustained momentum.

All of this is good news. And there is more. New Export Business index rose to 63.5 in January from 61.3 in December, marking the highest reading in series history with previous record of 63.3 reached in June 2006. 3mo MA through January 2013 is at 60.3, against previous 3mo MA of 55.5. This contrasts with 3mo MA through January 2012 at 52.4, 3mo MA through January 2011 of 53.1 and 3mo MA through January 2010 of 52.6.

This blistering pace of activity should, however, be treated with some concern. Now, take a look at the rates of expansion here, contrasted with rates of robust rises in Employment. Employment index rose to 56.5 in January from 53.4 in December. The Index posted above 50 readings in 5 months in a row and 3mo MA for the index is now at 54.6, up on previous 3mo MA of 51.3. Over the last 6 months, thus, employment in services sector have expanded rather rapidly.

Meanwhile, profitability in the sector continued to contract: Profitability Index (I compute my own for comparative analysis with Manufacturing, but let's stick to 'official' Profitability reading for now) remained well below 50, at 49.2, marking 62nd consecutive month of contracting profits in the Services sector.

Now, ask yourselves a simple question: 62 months of uninterrupted collapse in profits, plus over the same period 11 months of expanding employment, plus 21 months over the same period of rapidly growing exports, equals what? How can catastrophically less and less profitable business retain relatively robust employment levels and expand dramatically exports? Oh, well, the answer to this dilema is a simple, but unpleasant one - most of our services activity (and roughly speaking 90% of our services exports activity) is dominated by the tax-optimising MNCs. In other words, while the headline numbers are rosy, the underlying reality is probably less tangible to the Irish economy than we would like to believe. Employment growth in these MNCs-led sectors is primarily focused on importing skills (so no effect of reducing unemployment), while shrinking profitability in the Business Services sector and Transport, Travel, Tourism and Leisure sector (which led in profitability decline) means lower revenues for the Exchequer and lower indigenous employment.

One thing Irish Stuffbrokers issuing upbeat reports on PMIs basis are too lazy to check is the composition of what they are talking about at the aggregate levels. Here's a simple snapshot of employment increases over the last 6 months, reported in the PMIs:

Contrasted by 6mo data for profitability:

And contrasted again by New Export Business figures:

It turns out, on average, over 6 months, the ENTIRE range of PMI-covered services subsectors have managed to post increases in employment, and even mor robust rises in New exports, with largest rises, by far in the MNCs-dominated ICT services and Financial Services. But Business Services - the ones that are suffering from deep cuts in profits - are also posting rises in exports and employment. This is either bonkers data collection, or a severe selection bias toward MNCs with tax optimisation, not real activity on their minds.

You can see that new exports are acting to grow current employment, while shrinking profitability seemingly has no effect on current employment (current points marked in red) here:

More on profitability conditions and employment in both Manufacturing and Services PMIs in subsequent posts, but overall, the data is very positive. It is just worth asking a question just how much relevant is this data to real economic activity?

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.

5/9/2012: Services PMI for Ireland: August

I covered manufacturing PMI for Ireland for August in the previous post (here). This time, lets take a look at the Services Sector PMI released today by NCB.

In July, the Services Sector PMI registered the reading of 49.1 - the third consecutive month of below-50 readings, albeit at statistically insignificant difference from 50. In August, the headline Business Activity index reached 51.7, which is above 50, though once again not statistically significantly so. Still, good to see the number above 51, and at 51.7 we have a signal of modest growth.

Headline trends are:

• 3moMA is at 50.2, previous 3 months average is at 51.1, so we are still in a fragile bounce above 50. 
• 12mo MA is at 50.8, which compares relatively poorly to 12moMA through August 2011 (51.7) and 12mo MA through August 2010 (54.7).
• New Business Activity sub-index also reached above 50 in August, up to 52.6 compared to 49.5 in July.
• New Business 12mo MA is at 50.6 and this compares to same period MA in 2011 of 48.8 and same period MA for 2010 of 53.3. 3moMA is at 50.8 still below previous period 3mo average of 51.5.

You can see the moderating in volatility flat trend just above 50.0 for both series in the charts above that set in around April 2010. Good news, this is above 50.0. Bad news it is throwing fewer and fewer upside surprises. 

To the slight downside on the news front, New Export Business sub-index moderated growth signal from 55.7 in July to 54.1 in August, albeit this is still significantly above 50.0 line. I wouldn't call it a weak reading by any means, but a slippage in the rate of growth.

• 12mo MA through August 2012 is at 53.5 against same period 2011 at 51.0 and 2010 at 54.6.
• 3mo MA is now at 54.7 and this is an improvement on previous 3mo period of 54.1.
• Overall trend is relatively strong here and is sustained, which is good news.

In the chart above another notable trend is in Employment, which registered sub-50 reading once again in August - for the fourth month in a row - at 49.1. The decline in employment sub-index, however was moderated relative to July reading of 48.3.

• 12mo MA through August 2012 is at 48.2 which is virtually identical to same period average of 48.1 in 2011 and 2010.

Profitability also declined and is now at 42.9 - well into contraction territory. 

More on employment and profitability signals in subsequent posts.

Overall we have an improved performance in the Services sector in August, compared to May-July period, which is good news. Confidence is running high, rather too high (relative to actual activity levels), but that is relatively normal coming out of depressing three months around the end of Q2.

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...

3/8/2012: Irish Services PMI: Disappointing July

So following cracking Manufacturing PMI performance in July (see posts here , here and here on the subject), it was only predictable (based on all indicators relating to the sector activity) that Services PMI will put a boot into our hopes for growth. In that, the PMIs did not deviate from forecast.

Irish Services activity continued to decline in July, with headline PMI for Business Activity falling to 49.1 from 49.4 in June. This marks third consecutive month of sector activity below 50 reading. 12mo MA is now at 50.7, well ahead of the current reading. 3mo average through July is at 49.2 - signaling mild contraction, previous 3mo average through April is at 52.5. In 2011 3mo average for the same period was 51.5 and in 2010 it was 54.5. Not good dynamics for 2012 since May.

New Business activity also slowed down to 49.5 from barely expansionary 50.3 in June. 12mo MA is at 50.2 - effectively showing zero growth, while 3mo average through July is at 49.8 (ditto, but to the downside risk) and this contrasts with relatively robust 52.8 3mo average through April 2012.

Looking at the snapshot of the recent activity clearly shows lack of any breakout momentum in the series from the flat growth trend established around Q4 2010.

Other sub-series were all over the place.

• Employment tanked to 48.3 from already abysmal 49.2 in June. This is not surprising, as the sector has been signaling employment losses pretty much uninterrupted since the beginning of the crisis. 12mo MA is now at 48.1.
• Output prices continued to contract at 44.2 from 44.6 in June, while input costs rose at 52.3 on foot of 52.7 in June. Which means profitability tanked.
• New export business indicator jumped to 55.7 in July from 54.2 in June, but this is hardly surprising, since the index has been showing robust expansion for 12 months now, following a surprise drop to 49.6 in July 2011. 12mo MA is at 53.2, 3mo average through July is at 54.2. These are really hardly credible numbers, or rather, these are the numbers showing that our Services sector exports have very little to do with employment or overall business activity in the sector itself. In other words, this shows that our services exports are as captive to MNCs as our manufacturing exports.
• Profitability - as measured by PMI (note, I produce my own metric, which will be reported later) - tanked again to 43.8 in July against 43.0 in June.

In the next couple of posts I will be covering combined results for Manufacturing and Services PMIs and a special note on Confidence metric - in honor of the KBC/ICA 'survey' results released yesterday.

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.

1/6/2012: Irish Manufacturing PMI for May 2012

NCB Manufacturing PMIs for Ireland are out for May, so time to update charts.

Per release: "Operating conditions at Irish manufacturing firms improved again in May as output returned to growth and the expansion in new business was sustained. Increased workloads encouraged companies to take on extra staff, and the rate of job creation was solid during the month. Meanwhile, cost inflation remained elevated amid rising prices for fuel and other oil- related products."

Ok, running with numbers:

• Overall Manufacturing PMI has posted a moderate expansion at 51.2 in May up on 50.1 in April 2012. May reading is still within 1/2 stdevs from zero expansion level of 50, but nonetheless, a strong improvement on April. May reading is below 51.5 in March. 
• 12mo MA remains below 50 at 49.4, but 3mo MA is now above 50 at 50.9, compared to previous 3mo MA of 48.9.
• 3mo MA activity remains well below same period 2011 - 54.5 and below same period 2010 - 53.5.
• 6mo MA is about to cross 50, currently at 49.9.

Per chart above and the snapshot below:

• Output index rose to 51 in May from 48.6 in April, with 12mo MA at 50.1 and 3mo MA at 50.8. Previous period 3mo MA was 48.8. Output activity remains subdued compared to same period 3mo MA in 2011 - 56.4 and 2010 - 57.7. 6mo MA is at 49.8, heading for 50.
• Per release: "Higher new orders led firms to raise production during the month. Output increased slightly, following a reduction in the previous month. Production has risen in three of the past four months."
• New orders index moderated the pace of growth in May from 51.4 in April to 51.1. 12mo MA is now at 49.1 and 6mo MA at 49.7. 3mo MA in May stood at 51.7, against previous 47.6 - representing a solid improvement. However, new orders remain subdued compared to same period 3mo MA in 2011 - 56.0 and 2010 - 55.4.
• Per release: "New business at Irish manufacturing firms increased for a fourth successive month in May, with respondents mainly linking growth to higher new export orders."
• New exports orders also moderated the pace of growth in May from 53.1 in April to 52.9. 12mo MA is now at 51.5 and 6mo MA at 52.1. 3mo MA in May stood at 53.7, against previous 50.5 - representing a solid pick up in growth. However, new orders remain subdued compared to same period 3mo MA in 2011 - 59.0 and 2010 - 59.5.
• Per release: "New business from abroad rose at a solid pace as firms were reportedly able to generate sales from outside the eurozone."

Other sub-indices performed reasonably well with no surprises.

Per release: "A depletion of outstanding business also supported output growth in May, with backlogs decreasing at the sharpest pace since January. Manufacturers raised their employment for the

third month running in May amid increased workloads. The pace at which staff were taken on was solid, and the sharpest since March 2011." More on this once Services data is available.

"The rate of inflation of input prices remained sharp in May, and was only slightly slower than that seen in the previous month. According to respondents, the rise mainly reflected higher costs for fuel and other oil-related products. Strong competition largely prevented firms from passing on increased costs to clients, however, and prices charged were reduced fractionally." As usual, I will update profitability conditions changes once we have Services data, so stay tuned.

Overall, Irish Manufacturing is not exactly booming, but is clearly breaking the overall euro area trends. Robust exports exposures are supporting activity and are currently consistent with a shallow expansion in economic activity in Q2 2012.