10/2/2014: Ulster Bank Construction PMIs: January 2014

Ulster Bank Construction PMIs are out today with a massive hype over the numbers sweeping official analysts circles. Let's take the numbers in:

• Housing Activity index in January hit 59.8, which is statistically above 50.0 and marks 7th consecutive month of nominal readings above 50.0, although two of these months were not statistically significantly different from 50.0. Nonetheless, good news. 3mo MA through January 2014 is now at 61.1 (very healthy) against previous 3mo MA of 58.3. And 6mo MA is at 59.7 above 43.4 6mo MA through January 2013. Again, good numbers. However, the activity growth rates have slipped m/m, down from 63.2 in December 2013 - a significant fall of 3.4 points. Another key caveat here is that activity is rebounding from extremely low levels, so we can expect a big bounce. The encouraging news is that the bounce is sustained over 7 months and as the first chart below shows - it is robust and well above the upward-sloping long run trend.
• Commercial sector activity is also above 50.0 in January at 59.3. Overall dynamics are very similar to those in the Housing sub-sector. The index is now above 50.0 nominally for 6 consecutive months, with five of these being statistically significantly ahead of 50.0. 3mo MA is 60.5 (high) and compares favourably to 3mo MA through November 2013 which stands at 56.2. But, again, monthly change in the index shows slower growth in January (59.3) than in December 2013 (62.3). And low levels of activity for the starting point are also suggesting this to be a sustained rebound, consistent dynamically with normal recovery. Good news is that the series are still well above the long run upward trend line.

• Civil Engineering sub-index disappointed once again. In January 2014 index fell to 37.3 - the first time we have the reading below 40 since July 2013. This is plain ugly, as the index fell from 43.2 in December. We have not seen any growth in the Civil Engineering sub sector in any month since January 2009. Poor dynamics are confirmed by 3mo MA, 6mo MA and 12 mo MA - in other words, any way you take this data - it is bad.

• Overall construction sector activity index slipped to 56.4 in January 2014 from 58.3 in December 2013. There is much hoopla in official comments about December reading being 'huge', and it was strong, but it was way weaker than the top readings over the last 6 months across all subcomponents (61.7 in Housing activity recorded in October 2013) and it was only the 3rd highest reading for the overall index in the last 6 months. In other words, it was strong, but it was not spectacular. Worse, at 56.4 we are now below 3mo MA and bang on with the 6mo MA. Good news - we are still above the upward-sloping long run trend line. This is the fifth month of readings over 50.0 and all five were statistically significant.

So top of the line summary for indices: we have good readings in overall index and two sub-components, and a very poor reading in one subcomponent. No need for any spin here - net sector activity is positive and it has been sustained over few months now. Let's hope this continues so we can set aside any fears of the latest improvements being a 'dead cat bounce'.

9/12/2013: Irish Construction Sector PMI, November

Irish Construction sector PMI (Ulster Bank & Markit) is out today for November. The numbers are good.

Overall Index is down to 58.8 in November from 59.4 in October, but the reading remains firmly above 50.0 and this markets the third consecutive month of above 50.0 readings. All readings since September are statistically significantly above 50.0.

Dynamics are good, indicating solid upward trend:

• 12mo MA through November 2013 is at 48.0 against 44.4 for the same period in 2012
• 6mo MA improved to 52.4 in November 2013 against 42.1 a year ago
• 3mo MA is up at 58.0 in November 2013 against 46.9 in 3mo through August 2013.

Total Activity Index is strongly driven by upward trends in Housing Construction:

• Housing Activity index is at 60.4 in November, which is down on massive 61.7 in October.
• 12mo MA is at 50.4 against 43.0 for the same period in 2012
• 6mo MA is at 55.4 against 41.7 12 months ago
• 3mo MA is at 60.5 against 50.3 for 3mo through August.

Another major driver for the upward momentum in overall Construction PMI was Commercial Activity - running in line with Housing (chart above):

• Commercial activity index moderated to 60.0 from 61.6 in October. Commercial and Housing Activity sub-indices have been running jointly above 50.0 for 4 months in a row; in statistically significant terms this dynamic is present for three months in a row.
• 12mo MA for Commercial Activity index remains below 50 at 47.9, but this marks a major improvement on 42.9 for 12mo average through November 2012.
• 6mo and 3mo MAs are outperforming y/y and period-on-period. 

Only disappointment is Civil Engineering sub-index which recorded accelerated rate of decline in November at 45.7, compared to October when the reading was 47.2. November marks second consecutive month of accelerating falls.

However, November rate of decline is much shallower than was recorded a year ago (31.1).

In general, strong news on PMI front. and This supports overall Manufacturing and Services trends (see here: http://trueeconomics.blogspot.ie/2013/12/5122013-services-and-manufacturing-pmis.html)

11/11/2013: Irish Construction PMI - September 2013

While on PMIs, let's update Construction PMIs too, to cover September 2013 data. Manufacturing and Services October PMIs are covered here: http://trueeconomics.blogspot.ie/2013/11/11112013-services-and-manufacturing.html

In September, Overall Construction Sector PMI for Ireland rose to 55.7 which is the first reading above 50.0 (and it is statistically significantly different from 50.0) since January 2009.

The rise was broadly anchored, with Housing sub-index up at 59.5, marking the third consecutive month of above 50.0 readings (although previous two months were not statistically distinct from 50.0). Commercial activity sub-index also posted a rise to 56.1, marking the second consecutive month of above 50.0 readings. However, Civil Engineering sub-index remained below 50 at 47.3, although the pace of declines in activity has eased somewhat from 41.0 in August.

14/1/2013: Irish Construction PMI - December 2012

The latest stats for Construction Sector PMI for Ireland are out (link here) and the data is not encouraging. At 43.0, the rate of decline in the sector activity was slightly down in December 2012, compared to November and October 42.6 readings. In fact, the rate of decline was the lowest since May 2012 when the index reading was 46.3. However, despite this, Construction sector activity continued to show uninterrupted contraction for 41 months in a row (the records available to me only go back to August 2009).

Overall sector PMI is currently below12mo MA of 43.84 (2011 average was 44.42, ahead of the 2012 average). PMI in December was ahead of 3mo MA of 42.73, but not statistically significantly so, and ahead of 6mo MA of 42.17.

As shown above, rate of decline has moderated in all 3 core components of the overall index:

• In Housing sub-sector, index finished 2012 on 45.8, an improvement m/m from 44.2 in November and better than 3mo MA (44.47), 6mo MA (42.82) and 12mo MA (42.49).
• In Commercial sub-sector, index ended December at 41.3 - a gain on 39.8 in November, but below 3mo MA (41.73), below 6mo MA (42.65) and below 12mo MA (45.16)
• In Civil Engineering, index rose to 35.2 (still massively below 50 line that would mark zero growth) from 31.1 in November. The index is ahead of 3mo MA (32.33), ahead of 6mo MA (33.42) and below 12mo MA (36.86).

Correlations between different index components are shown below:

Overall, Construction Sector activity is still contracting, albeit contraction rate has moderated somewhat. In December 2011, the index stood at 49.9 (virtually zero growth signal), while in December 2012 it was at 43.0 (clear contraction). Housing subsector registered the only monthly expansion at 52.3 (since 2009) in December 2011, contrasted by an outright decline of 45.8 in December 2012. Commercial subsector activity showed nearly zero growth at 49.8 in December 2011 against an outright and deep contraction of 41.3 in December 2012. And Civil Engineering posted a substantial contraction reading of 37.7 in December 2011, more than matched by an even deeper contraction of 35.2 in December 2012.

11/12/2012: Ireland and EU27 Construction sector activity Q3 2012

On foot of the previous post looking at Q3 2012 data for Construction and Building Sector activity in Ireland, here are some international comparatives.

Keep in mind the mental key to decoding these: per Irish Government and a host of its 'analysts', Ireland has delivered an economic turnaround sometime back in early 2012 and our economy has stabilized. We are not Greece. In fact, per claims, we are the best performing economy in the Euro area periphery.

With the above in mind, chart below shows Ireland's Building & Construction Sector performance with index normalized at 100=2005, set against the backdrop of the 'Peripheral' Euro area states:

Pretty clearly, we are 'unique' in the periphery as being so far the worst performing economy in terms of Building & Construction. Now, let's recall that in Ireland, Building & Construction are about the only conduits for household investment. Also, let's recall that household investment is usually seen as the leading indicator of cyclical turnarounds.

Now, to the full EU27 comparative:

And again, by far, Ireland is the worst performer in the above. In fact, based on 2012 data through Q3:

• Ireland's index of construction activity is currently at 20.85, down on 2011 index of 23.4 and down on pre-crisis peak of 103.6. 
• Which means that Irish activity index is now down to the absolute lowest in the EU27. Worse, our index reading is worse than Greece's (37.7 or 81% ahead of Ireland's). 
• We are 44.7% below Greece, 53.2% below Spain, 62.7% below Portugal and 73.2% below Italy.

So that 'turnaround' or in Hillary Clinton's words 'rebound', then... certainly not to be seen in Building & Construction sector.

11/12/2012: Construction Sector Activity in Ireland - Q3 2012

Horrible numbers out today for the Irish Building & Construction sector.

Per CSO: "The volume of output in building and construction was 4.2% lower in the third quarter of 2012 when compared with the preceding period. This reflects decreases of 5.3%, 2.4% and 1.9% respectively in the volume of residential building, civil engineering and non-residential building. The change in the value of production for all building and construction was -2.1%. On an annual basis, the volume of output in building and construction decreased by 10.8% in the third quarter of 2011. The value of production decreased by 8.5% in the same period."

Now some details:

• Value Index for ex-Civil Engineering work stood at 17.5 in Q3 2012 (100=2005 activity levels), down 15.5% y/y, marking 23rd consecutive quarter of declines (! give that number a thought).
• Worse, ex-Civil Engineering Value index is down 2.23% q/q, down 10.15% for Q2-Q3 2012 compared to Q4 2011-Q1 2012 6mo periods and down 14.5% for the 6 months through Q3 2012 compared to same period in 2011.
• The rate of annual decline in the index has accelerated since Q4 2011.
• Volume Index for ex-Civil engineering work fell to 15.5 in Q3 2012 from 15.9 in Q2 2012. The Index is now also down consecutive 23 quarters. The annual rate of decline continued to accelerate for the fourth quarter in a row.
• In 6 months through Q3 2012 index fell 15.82% compared to same period of 2011. Quarterly index change is -2.52%.
• Relative to peak, Value Index in ex-Civil Engineering sector is now at 15.39% and Volume Index is at 14.57%.

In Civil engineering sector things are bouncing at the bottom - a pattern that is now running solidly from Q3 2010:

• Value Index for Civil engineering slipped to 63.0 from 64.6 in Q3 2012 compared to Q2 2012, marking a decline of 2.48% q/q. However, due to massive jump in Q2 (+16.2% y/y), index is still 9.2% ahead of Q3 2011 reading. This side of the Index is likely to suffer in 2013 due to Budget measures on capital spending.
• Volume Index of Civil Engineering also fell from 57.5 in Q2 2012 to 56.1 in Q3 2012 (-2.43% q/q), although the index is up 7.9% y/y in Q3 2012 (due to a one-off substantial rise of 14.8% in Q2 2012).

Overall, based on simple averages, activity in Civil engineering remained broadly unchanged - at absolute lows - since Q3 2010, averaging between 63.3 for the Value Index and 56.3 for the Volume Index. This dynamic is simply inconsistent with any talk about economic turnaround.

Misery comparatives for the sector are self-evident when looking at residential and non-residential indices:

• Value of Residential Construction reached another historical low in Q3 2012 - hitting 8.2, down from 8.5 in Q2 2012. This means that activity by value in this sub-sector is now down 91.8% on 2005 levels or 92.8% on pre-crisis peak. The Index has been posting annual rates of decline in every quarter since Q1 2007, or 23 quarters in a row. The rate of decline (y/y) also accelerated since Q1 2012.
• Volume of Residential Construction is down from 7.6 in Q2 2012 to 7.2 in Q3 2012. Again, this implies that volume index is now down 92.8% on 2005 level and 93.0% down on pre-crisis peak. Annual rate of decline accelerate to 20% in Q3 2012, the highest rate in 4 quarters. The index has now posted 26 consecutive quarters of annual declines.
• Non-residential Construction Value Index fell from 53.5 in Q2 2012 to 52.5 in Q3 2102, with annual rate of decline accelerating to 15.5% in Q3 2012, marking third consecutive quarter of annual declines. The index is now 57.4% down on pre-crisis peak.
• Non-residential Construction Volume Index is down from 47.5 in Q2 2012 to 46.6 in Q3 2012, marking an accelerated annual rate of decrease of 16.3% in Q3. The Index is now down 58.4% on pre-crisis peak.

If anything the above dynamics clearly show that the rates of activity collapse are accelerating through Q3 2012, nto ameliorating or turning to positive growth. Both series dynamics, therefore, are consistent with worsening of economic conditions, not stabilization or a turnaround.

I will blog on European countries comparatives in the next post.

15/6/2012: Q1 2012 Construction Sector Activity for Ireland

Having dealt with leading indicator for Construction sector activity - Ulster Bank PMIs - in the previous post, now's the time to update the latest actual outrun figures from the CSO that cover Q1 2012. Keep in mind - core conclusion in the previous analysis showed no signs of uptick in activity in the sector, with housing and commercial real estate construction activity continuing to shrink.

Pre latest CSO data:

• In Q1 2012 Value of all activity ex-Civil Engineering has fallen to 18.7 against 20.6 in Q4 2011. Quarterly rate of decline therefore is -9.22% for value against the annual rate of decline of -13.4%. Y/y rate of decline accelerate from Q4 2011 when it was 8.4%. Over last 6 months the index declined -5.07% compared to previous 6 months and -10.88% y/y. Q1 2012 marks an absolute record low activity by value in the broader construction sector ex-civil engineering.
• In Q1 2012 Volume of all activity ex-Civil Engineering fell to 16.7 from 18.5 in Q4 2011, marking another record low for the series. Year on year, the index has fallen 13%, which represents the sharpest contraction in four consecutive quarters. Quarter on quarter the index is down 9.73%. Things are getting much worse, rather than less worse. Over the last six months, average index reading fell 5.38% compared to previous six months average and year on year last six months average is down 9.51%.
• Relative to peak, value of construction production ex-civil engineering now stands at just 16.45% of the peak levels and volume of activity is now at 15.70% of the peak levels, both showing record declines.

For Civil Engineering sub-sector - the very same trends are true, with one exception - the rate of declines in activity slowed, not accelerated, in Q1 2012. Alas, we are thus in the case of getting worse more slowly, which is, as I like pointing out, not the same as getting better.

Value of Residential Construction fell to 9.4 in Q1 2012 against 9.7 in Q4 2011. The index declined 1.4% y/y and is now down, on average 4.5% in the last six months compared to previous six months. Year on year, average activity in the last six months fell 18.03%. Now, keep in mind, Residential Construction is now running at 91.75% below its peak pre-crisis levels.

Volume of Residential Construction fell to 8.5 from 8.8 in Q4 2011, a decline of 15% y/y. Average activity for the last six months was down 4.95% on previous six months and down 15.61% on same period a year ago. Relative to peak, volume of residential construction is now down 91.76%.

Per chart above, Value of Non-Residential construction declined to 53.8 in Q1 2012 from 62.4 9n Q4 2011, marking annual decline rate of 12.4%. Average six months activity is now down 5.53% on previous sexi months period and is down 5.83% on the same period a year ago. Relative to peak, non-residential construction value is down 56.37%.

Volume of Non-Residential construction activity dropped to 47.8 from 56.6 in Q4 2011. Annual rate of decline in Q1 2012 of -12% comes on foot of an annual increase of 3.3% in Q4 2011. 6mos average through Q1 2012 is now 5.43% below the previous 6mo period and is 4.31% below same period a year ago.

Chart below illustrates annual changes.

So the very same trends shown by the PMIs are present in the actual data. Once again, where's all that pinned up demand for new offices and facilities, for retrofits of facilities and for fit-outs that were supposed to come with the 'robust jobs creation' by the MNCs?

15/6/2012: Irish Construction PMIs - no sign of that MNCs jobs creation, again

What is going on in Irish construction sector, folks? The latest statements from the Irish development authorities and the Government and its 'experts' would make you believe that MNCs are killing each other trying to rush into building new space to house those thousands of workers that are allegedly being hired by them. Of course, we know the latter is balderdash (see here) when it comes to date through 2011, but can it be true for trends since 2011? After all, the Government aims to create tens of thousands new jobs in 2012 in the MNCs-sectors.

Ok, here are two posts on latest construction sector activity. First one on Construction Sector PMIs (courtesy of the Ulster Bank) and the second one on CSO data.


Take a look at the latest (May 2012) Construction Sector PMIs:

Suppose there was a rush in activity in MNCs-sectors. That would translate in some uptick in construction activity in Commercial sector. Right? In May 2012 Commercial sector Construction PMI stood at 46.8, which is (1) signal of rather significant rate of contraction m/m, (2) marks the lowest reading in the sub-index since November 2011, and (3) is worse than shallower rate of contraction signaled by 48.4 reading in April.

In fact, May 2012 reading is below 3mo and 6mo MA readings. So the rate of decline has accelerated in May compared to 3mo average and 6 mo average.

As dodgy as the activity is across all Construction-related sub-categories, it is the Commercial sub-sector activity that is signaling worsening of the already poor trend.

So, where are those thousands of new jobs going to be housed? Per Ulster Bank (emphasis mine): "Those panellists that recorded a decline in overall construction activity during the month mainly linked this to falling new business. New orders at Irish constructors decreased for the fifth successive month. Where firms were able to secure new business, they reported that this was often dependent on prices being reduced."

Now, you might say that there can be 'expectations' of future activity that are not fully reflected in the above figures. Yep. "Irish construction firms remained optimistic that activity will be higher in 12 months’ time than current levels, with sentiment improving from that registered in April. That said, positive expectations largely reflected the fact that a rise in activity is likely given the low levels currently being recorded." So, yes, firms are still giddy (they've been 'optimistic' now for many months, in fact over a year), but they are not giddy about hordes of new orders arriving. Instead they are optimistic about the prospect of continued attrition wiping out more of their competitors or that they might pick some jobs as the derelict unfinished sites start crumbling down in earnest. Nice one.

Economics 26/06/2009: EU growth, Planning Permissions & QNHS

Eurocoin is out again and it is time to update our forecasts for Euroarea growth. First a note - Eurocoin have revised their past numbers in line with new methodology.
Note that above I use upper range forecast for July Eurocoin of -0.52 and implied GDP growth forecast of -2.1% for Q2 2009. Lower range forecast for the indicator is -0.91 and for GDP growth of -2.5%. Thus, I see an even chance of renewed deterioration in growth conditions in the Euroarea into mid Summer.


CSO Planning Permissions data Q1 2009: planning permissions were granted for 14,177 dwelling units, compared with 18,582 units for the same period in 2008, a decrease of 23.7%. Planning Permissions were granted for 10,256 houses in Q1 2009 and 13,301 a year earlier, a decrease of 22.9%. Planning permissions were granted for 3,921 apartment units,
compared with 5,281 units for the same period in 2008, down 25.8%. One-off houses accounted for 19.3% of all new dwelling units granted planning permission in this quarter. The total number of planning permissions granted for all developments was 7,486. This compares with 11,055 in Q1 2008, a decrease of 32.3%. Total floor area planned was 3,419 thousand sq. metres in Q1 2009. Of this, 61.1% was for new dwellings, 25.4% for other new constructions and 13.4% for extensions. The total floor area planned decreased by 24.3% in comparison with the same quarter of 2008.

Illustrated:
Total annual permissions are down, Q1 permissions trending down as well, especially for dwellings.Total floor area down, but by less.
As average floor area per unit is rising along established trends - delivering value for money is tighter markets?The trend for better quality and smaller quantity is evident, which should improve performance for better builders, but pressure the profit margins. One area of concern is that the authorities are not granting higher density permissions, implying that per existent acre of site, cost of building is up, further reducing margins.
Track homes are not exactly popular, while
one-off houses are even less so. That said - square footage is also rising for one-off dwellings as, presumably, rural Ireland decided to spread out in the recession (those CAP payments are still rolling in?).
No such luck for apartments buyers, but they do have some nicer square footage to go by, as sales stagnated and developers need more goodies for money to close on new units. We can expect Ken 'The Merciless' MacDonald to start writing lengthy articles telling us that NOW IS THE TIME TO BUY one of his apartments, as RETURN OF CAPITAL APPRECIATION IS IMMINENT... Beware of the merchant...


Quarterly National Household Survey was out earlier in the week.

In Q1 2009 there were 1,965,600 persons in employment, an annual decrease of 158,500 or 7.5%. This compares with an annual decrease in employment of 3.9% in Q4 2008 and growth of 1.7% in the year to Q1 2008. There was an annual decrease of 122,200 or 10.2% in the number of men in employment, while the number of women in employment decreased by 36,300 or 3.9%.

The overall employment rate among persons aged 15-64 fell to 63.2%, down from 68.4% in Q1 2008. This brings the employment rate back to a level comparable to that recorded in Q1 1999, thus erasing all the demographic and migration benefits accruing to Ireland in the last 10 years.

Full-time employment decreased by 176,200 over the year, part-time employment increased by 17,700, with 14,700 of the increase attributable to males and 2,900 to females. Recalling that even before the current crisis Ireland was creating predominantly part-time jobs, we are now facing seriously adverse quality of employment conditions in the country.

There were 222,800 persons unemployed in Q1 2009, an increase of 113,400 (+103.7%) in the year. Male unemployment increased by 85,300 (+116.7%), with the number of unemployed females increasing by 28,200 (+77.7%). The seasonally adjusted unemployment rate increased from 8.1% to 10.2% over the quarter and from 4.9% over the year - the highest level since 1997. Seasonally adjusted, the male and female unemployment rates stood at 12.5% and 7.0% respectively. The long-term unemployment rate was 2.2% in Q1 2009 compared to a rate of 1.3% in Q1 2008.

Now, some illustrations:
Employment is folding everywhere, except for personal protection services. wait another few months and a new emergency rip-off Budget, and guarding our unpopular Government will be the boom sector...
Average hours worked down, short-term work up, contractors work down. And in more details:
Bad employment up, good employment down. But public sector is not feeling the heat:

Regionally - all the subsidies to waste, the same black spots of unemployment remain:Border, Midlands, Mid-West and South-East are all bad performers in unemployment terms in the boom days of 2007. Ditto today. A new entry - casualty of the downturn - is the West. Doubtless, there will be calls for new tax on Dublin to pay welfare rolls wages out in our Gateways to Excellence Regions... But look at participation rates:
Collapsing across the state. Note Border and Midlands - dramatic fold down in participation rates - driven by, most likely an exodus of younger workers from Dublin and other areas' construction sites... No wonder I heard Midlands referred to as our Little Poland (Lithuania, etc).

And finally - my favourite topic - demographic dividend...
Note that as of Q1 2009, unemployment rate among 15-19 yo males was 33%! We are indeed wasting our young to protect job security of our public sector middle-aged and elderly...