2/1/2014: Manufacturing PMI for Ireland: December 2013

Manufacturing PMI is out for Ireland today, per Markit/Investec release: "The Irish manufacturing sector ended 2013 on a positive note as growth of output and new orders gained momentum in December. Meanwhile, the current sequence of job creation was extended to seven months. On the price front, input cost inflation picked up slightly while firms raised their output prices for the fourth month running."

Please note: since Markit/Investec no longer release actual numbers for subindices (e.g. employment or orders or export orders, etc), we have to take these claims on faith. For example, the release claims increased export orders from China as one of the drivers of the new business improvement. Yet Irish exports to China are low and it is hard to see how this source of uplift can register as a driver in the overall data, unless the survey participation is severely skewed toward some specific MNCs with remaining significant exposure to exports to China.

Note: Good exports to China from Ireland in January-October 2013 stood at a miserly EUR1.642 billion, down from EUR1.885 billion recorded in the same period of 2012 and representing just 2.26% of our total goods exports in January-October 2013.

Further per release: "The seasonally adjusted Investec Purchasing Managers‟ Index® (PMI®) – an indicator designed to provide a single-figure measure of the health of the manufacturing industry – rose to 53.5 in December from 52.4 in November. This signalled a solid improvement in business conditions, and the seventh in as many months."

The last claim is a matter of interpretation. 1.1 points gain in the PMI reading is the 4th largest in 12 months of 2013 and 7th largest in the last 24 months. However, the index reading in December is the 2nd highest in 2013 and the 3rd highest over the last 2 years, which is, undoubtedly, a good thing.

Two charts and dynamic trends to illustrate headline index changes:

In terms of overall PMI, Manufacturing activity averaged at 51.1 over the last 12 months, so the current reading is above that. However, December reading is below the 3mo average for November-December 2013 which stands at 53.6.

Q1 2013 average PMI for Manufacturing was 50.13, and this fell to 49.33 in Q2 2013, before rising to 51.9 in Q3 2013 and to a healthy 53.6 in Q4 2013.

Overall, we are now into third consecutive month with the PMI for Manufacturing index statistically above 50.0. Another good thing.


Full Markit/Investec release is here: http://www.markiteconomics.com/Survey/PressRelease.mvc/119915a961bd40caa4218d77234245e2

7/12/2013: Global Manufacturing PMIs: Summary for October-November

In previous posts I covered PMIs for Ireland for both services and manufacturing: http://trueeconomics.blogspot.ie/2013/12/5122013-services-and-manufacturing-pmis.html Also, detailed PMIs coverage is linked in the above.

Here is a neat summary of global Manufacturing PMIs via Markit:

5/12/2013: Services and Manufacturing PMIs for Ireland: November 2013

Yesterday, Markit and Investec released the second set of Purchasing Managers' Indices (PMIs) for Ireland covering Services sector. As usual, here is the analysis of combined Manufacturing and Services PMIs.

Detailed analysis of Manufacturing PMIs was covered here: http://trueeconomics.blogspot.ie/2013/12/2122013-manufacturing-pmi-for-ireland.html. Also, note, I covered actual services activity index (latest data through October) here: http://trueeconomics.blogspot.ie/2013/12/5122013-irish-services-index-october.html

Manufacturing PMIs in November 2013:
- Slipped to 52.4 (still in expansionary territory) from 54.9 in September.
- 3mo Average through August 2013 was 52.1 against 3mo average through November 2013 at 53.3.
- 6mo average through November 2013 is up 4.6% on previous.

Services PMIs in November 2013:
- Slipped to 57.1 from 60.1 in October.
- 3mo average for the period through August 2013 was at 55.4 and 3mo average through November is at 58.0
- 6mo average is up 6.6% on previous.

Both, Manufacturing and Services PMIs are now above 50 for 6 consecutive months. In statical terms, the two PMIs are above 50.0 for 6 months for Services and 3 months for Manufacturing.

Overall, the picture is consistent with upward sub-trend over 3 months for both series.

However, changes in 3mo averages warrant caution on sustainability:

Joint evolution of the series y/y is still encouraging:

And 24-months rolling correlation between series is rising once again - currently at 0.340, the highest since December 2011 when both series were in sub-50 territory.

So net is that the PMIs are still strong, trend is still upward and the short-run uplift continues. Big question is whether this is going to translate into real activity on the ground or mark another period of booming PMIs and stagnant economy. Time will tell...

2/12/2013: Manufacturing PMI for Ireland: November 2013

Manufacturing PMI for November released by market and Investec today shows slight slowdown in the rate of manufacturing sector expansion in Ireland.

Overall PMI declined from blistering 54.9 in October to more moderate and sustainable 52.4 in November. October reading was remarkable as it was the highest PMI reading posted since 56.0 was recorded in April 2011. Thus, some moderation was expected.

November reading pushed 12mo MA to 51.1, implying that on average Irish manufacturing was expanding over the last 12 months. 6mo MA is at 52.2 and 3mo MA is 53.3 through November, up on 51.1 3mo average through August 2013. Current 3mo average is ahead of that for 2010, 2011 and 2012. even setting October reading at 3mo MA level through September still leaves the average ahead of 2010-2012.

Current reading remains in statistically significant territory - another added positive.

Aside from that, no comment is possible, since Investec and Markit are continuing not to release underlying sub-indices.

With the above we can now confirm a new upward sub-trend from May 2013. Let's hope it will continue.

11/11/2013: Services and Manufacturing PMIs for Ireland: October 2013

With some delay, let's update the data on Irish PMIs.

Before we do, quick explanation for a delay - I used to be on the mailing list for Investec releases to PMIs for years (way before the organisation became a part of Investec). This all ended some months back when I was struck off the mailing list. Presumably, being a columnist with 2 publications & blogger, who always and regularly cites PMIs and Investec as their publisher, is just not enough to earn one the privilege of being sent the release. Oh, well…

Now to numbers… 

Services PMI hit 60.1 in October, up on 56.8 in September, marking the second highest reading since January 2007 (the highest was recorded in August this year at 61.6). This is a strong return. 3mo average for the period August - October 2012 was 53.9, current run is 59.5, so the distance y/y is 10.4% - statistically significant. 

Notably, from January 2010 through current, the average deviation of PMI from 50.0 is 2.5, so we are solidly above the average.

Quarterly averages are also strong. Q1 2013 posted 54.23 and Q2 2013 was at 54.27, but Q3 2013 came in at 58.67. And we are now running well ahead of that.

With full-sample standard deviation of the PMI reading distance to 50.0 at 7.3  (same for the period from January 2008 through current being 6.84), we are now solidly in statistically significant territory for expansion since July 2013.

Manufacturing PMI also strengthened, although by much less than Services. Manufacturing PMI hit 54.9 in October, up on 52.7 in September and 3mo average through October 2013 is at 53.2, which is 3.% ahead of the 3mo MA through October 2012.

Quarterly averages are signalling weaker growth, however. Q1 2013 was at 50.1 (basically, zero growth in statistical terms), while Q2 2013 stood at 49.3 (same - zero growth in statistical terms). Q3 2013 came in at 51.3 and the October reading is ahead of this. In fact, October 2013 reading is the highest since April 2011. October reading is statistically significant, based on historical data, but it is not statistically significantly different from 50 on the basis of data from January 2008.

The above shows one thing: we are above historical and 2008-present averages for both Manufacturing and Services PMIs (good news). Below chart confirms relatively strong performance for the series on 3mo MA basis (good news):

As chart below shows, there is a third good news bit: both series have now broken away from their asymptotic trend, with Manufacturing at last showing some life.

Note to caveat the above. As I showed before, both manufacturing and services PMIs have relatively weak relation to actual GDP and GNP growth, with Manufacturing PMI being, predictably, better anchored to real growth here. Details here: http://trueeconomics.blogspot.ie/2013/10/3102013-irish-pmis-are-they-meaningful.html

3/10/2013: Irish PMIs - are they meaningful?

Having covered Services and Manufacturing PMIs (see links here: http://trueeconomics.blogspot.ie/2013/10/3102013-services-and-manufacturing-pmis.html) in terms of Q3 2013 averages, let's have a reminder as to the links to actual growth in Irish GDP and GNP these series have.

Two charts covering through Q2 2013:

Thus, overall:

• Changes q/q in Manufacturing PMIs have only a weak correlation with actual real (constant prices) GDP and GNP changes q/q: R-squares of just 35.6% and 29.4% respectively when we remove the constant factor (which is not significant by itself at any rate). This is weak to say the least.
• Changes q/q in Services PMIs have only a very weak correlation with actual real (constant prices) GDP and GNP changes q/q: R-squares of just 16.4% and 17.6% respectively when we remove the constant factor (which is significant). This is very poor.
• With positive intercepts of 0.0023 for GDP and 0.0024 for GNP, the Services PMI R-square rises to 23.7% for GDP and 22.7% for GNP. Once again, no change to the above conclusion.

The above suggests that a significant component of both PMIs come from transfer pricing and not real economic activity on the ground. Or put differently, the PMIs are not that exceptionally meaningful indicators of actual levels of activity in the economy and are only weakly-significant in indicating the direction of that activity. 

Note: this is quarterly averages data, not much more volatile data based on monthly series. Which puts to question monthly movements in PMIs even more...

3/10/2013: Services and Manufacturing PMIs for Ireland: September 2013

In the previous posts I covered separately both Service PMI for Ireland and Manufacturing PMI (released by Markit & Investec). As noted, both series show strong performance in September. Here is the combined analysis:

Both Services and Manufacturing PMIs are now above their historical crisis-period averages. Manufacturing PMI is slightly ahead (0.1 points) of its historical pre-crisis average since May 2000 when both series start running coincidently. Services PMI is now slightly below its historical pre-crisis average.

Services PMI have broken out of the flat trend and are now trending up for the last 12 months. However, Manufacturing PMI continues to move side-ways, although on average remaining positive.

Two major points: September 2013 reading puts both indices at statistically significant levels above 50.0, which is the first such occurrence since February 2011:

In addition, we are seeing stronger positive correlation between the two indices (the 12mo rolling correlation below is only indicative) established since February 2013 low:

In other words, both sides of the economy are now performing better, but we need this momentum to be sustained over 2-3 months to see serious feed-through into actual economic activity figures.

1/10/2013: Irish Manufacturing PMI: September 2013

Some good readings from Irish Manufacturing PMI (Investec-sponsored Markit data) for September:

• Headline PMI is at 52.7 up on 52.0 in August and the highest reading since 53.9 in July 2012.
• Critically, this appears to be the first statistically significant reading above 50.0 since November 2012.
• I use 'appears' above since we have no formal analysis from Markit on this (Investec don't do analysis). The distribution is Laplace. August reading was close to being statistically significant.
• In terms of trend, Q1 2013 average reading was 50.13, Q2 2013 at 49.33, Q3 now reads 51.9. 
• 12mo MA is at 50.8.
• 3mo MA through September 2013 is at 51.9, which is below the same period 2012 (52.2), but ahead of 2011 (49.2) and slightly ahead of 2010 (50.4).

Now, it appears we have broken the downward trend at last. Index volatility (36mo rolling) has fallen slightly to around 2.3 in terms of 3mo average through September, which is close to historical average of 2.4 and is well below the crisis-period average of 3.4. Positive skew on change is at 3mo average of +0.75 (for deviations from 50.0) and this contrasts with a negative -0.34 skew for historical data and -0.25 skew for crisis period data. So let's call it a trend reversal for the short term:

Sadly, nothing else to report, since Investec/Markit continue to push out data-less releases. Wish I could tell you about employment, exports orders, total orders... but there is not a single number in the press release, only comments.

2/9/2013: Irish Manufacturing PMI: August 2013

Markit/Investec Irish Manufacturing PMI out for August today. As usual - no data on sub-indices, no statistical analysis released.

Headline reading improved to 52.0 in August, up on 51.0 in July, marking the highest reading since November 2012 when it stood at 52.4 and the third highest reading in 12 months. Release from Markit is here. My analysis as follows:

• 1.0 points gain on July is a decent number. We are now into third consecutive month of nominal seasonally-adjusted readings above 50.0. All of these are good signs.
• Another good sign: 12mo MA is now at 50.8 and 3mo MA is at 51.1. This implies that 3mo MA is ahead significantly over 48.8 reading for 3mo through May 2013. However, on a negative side, 3mo MA through August 2013 is down on 52.6 recorded for the 3mo through August 2012, although it is ahead of 3mo MA for the same period in 2011, and down on same period average for 2010.
• Cautionary signs: current reading is still below statistically significant levels (ca 52.2), although we are in a Laplace distribution (as I noted earlier, based on higher moments). Last time the index was reading statistically above 50.0 was in November 2012.
• Another note of caution: Q3 2013 to-date averages at 51.5 - nice number, but recall that in a contractionary Q1 2013, PMIs averaged above 50.1. Nonetheless, good news - the index for Q3 2013 to-date is above both Q1 and Q2 readings. 

Trends illustrated:

Note strong departure from 6mo MA in the chart above, which is encouraging; and in the chart below, note that we have finally reached above the crisis-period average for the index.

Another good news bit is that we have moved closer to confirming the index breakout from the downward trend that run from July 2012 through June 2013. One-two months more of this performance and we can be moving onto a new trend:

Summary: overall, decent performance by manufacturing PMI in August. 

I cannot confirm any of the statements made by Markit/Investec, and note: I have not seen Investec usual longer release so far. However, per Markit, all three main sub-sectors have posted increases in output in August, and "new orders rose for the second successive month, and at a solid pace that was the strongest since July 2012". No idea where actual indices readings are at. "Meanwhile, employment continued to rise, extending the current sequence of job creation to three months. However, the pace of increase slowed over the month." Again, no idea as per actual readings.

2/8/2013: Irish Manufacturing PMI: July 2013

Manufacturing PMI for Ireland was out yesterday. And as usual, it was worth waiting and giving the Irish media time to get through their circus of 'analysis'. The excitement of 'growth' predictions aside, here's the raw truth about the numbers (please, keep in mind that shambolic data coverage by Markit press-release is no longer conducive to any serious analysis of the underlying components of the PMIs). Note: PMI for Ireland are released by Investec and Markit.

All we have is the headline number. On the surface, headline Manufacturing PMI moved from 50.3 in June to 51.0 in July. Both numbers are above 50.0 and thus suggest expansion. This marks two consecutive months of growth.

However, there are some serious problems with the above. Read on:
-- At 51.0, July PMI is barely above 12 mo average of 50.7.
-- 3mo average through July is at 50.3, ahead of 49.4 3mo average through April 2013 - which is good news.
-- In July 2012, PMI was at 53.9 which was statistically significantly above 50.0 (in other words, statistically we did have growth in July 2012, which turned out to be pretty disastrous year for manufacturing and industry as we know). And in July 2013 at 51.0 there is no statistically significant difference in current PMI reading from 50.0, which means - statistically-speaking - we do not have growth.
-- Current 3mo MA at 50.3 is not different from 50.0 statistically
-- Current 3mo MA is below that in 2012 (52.7), ahead of that in 2011 (49.9) and below that for 2010 (52.4) - which is not exactly confidence-inspiring, right?
-- M/m (recall, these are seasonally-adjusted numbers) there was a rise in PMI of 0.7 (slightly better than m/m rise of 0.6 in June 2013). Alas, this monthly rise was also statistically indifferent from zero.

Here are two charts that illustrate the above points.

In short - good news is that PMI is reading above 50 and strengthened in July compared to June. Bad news is that statistically-speaking, neither the reading levels (in both June and July), nor increases m/m (in both June or July) are significant. Which means that we simply cannot will away the caution in reading the PMI numbers this time around.

7/72013: Irish Manufacturing & Services PMI: June 2013

In the previous post I covered in detail the dynamics of the Services PMI (here) and few posts back, I covered Manufacturing PMIs (here). Now, lets take a look at both together.

Chart above shows the deviations of both PMIs from 50.0, with pre-crisis and post-crisis averages.
The relative weakness in Manufacturing performance, from the end of Q2 2011 through current is pretty much apparent. Both, manufacturing and services PMIs signaled much stronger growth conditions prior to the crisis, than since the beginning of 2010.

The most significant decline took place in Services, with the pre-crisis average deviation from 50.0 at 7.6 falling to 1.9 average deviation in post-January 2010 period. With STDEV at 6.5 since 2008 (7.4 prior historical), and with skew at -0.7 and kurtosis at 0.73, we are nowhere near average deviation being statistically significantly different from zero since the onset of 'recovery'.

Manufacturing decline has been more modest, given weak rates of growth in pre-crisis period. The average rate of pre-crisis deviation from 50 was 2.6 and that well to 1.1. With historical STDEV of 4.2 and STDEV since 2008 at 5.2, skew at -1.6 and kurtosis of 3.24, this is again indistinguishable from zero growth conditions.

On slightly better side of things and along shorter-run dimension, 3mo MAs are both above zero, but, once again, none are statistically significantly different from zero.

There is a strong, but non-linear relationship between Manufacturing and Services PMIs at levels, and it shows that year on year, relative gains in Manufacturing over 2011-2012 got erased over 2012-2013 and were replaced by relative gains in Services.

Irish PMIs have, however, very tenuous link to actual economic growth. Here are two charts showing this week relationship for log-log growth terms, but exactly the same picture is confirmed by taking simple level deviations in PMIs from 50, as well as for linear and cubic relationships (for robustness):

It is quite telling that Services PMIs have much weaker explanatory power for GDP and GNP growth than Manufacturing PMIs, confirming that Irish services, dominated by ICT and IFSC tax-optimising MNCs are not as relevant to Irish economy as manufacturing sectors.

Another telling thing is that both for Services and Manufacturing, the sectors activity as measured by PMIs has stronger relationship with GDP than GNP - which is also predictable, once you consider the PMIs heavy slant toward MNCs.


Note: raw data on PMIs levels is taken from Markit-Investec releases, with all analysis above, as well as deviations from 50 and all other transformations, including quarterly data computations, undertaken by myself. These transformations and analysis are intellectual property of my own and should not be cited without appropriate attribution.