1/3/19: U.S. PMI is not at a Crisis levels

My take on today's ISM for Manufacturing data here: https://twitter.com/GTCost/status/1101512164584546304, with charts:

Chill-ax everyone… #ISM is not even close to signalling a serious trouble ahead… Not that it is a measure I would even consider for troubleshooting.

— Constantin Gurdgiev (@GTCost) March 1, 2019

8/5/18: BRICS DECK: Part 2: PMIs, Investment and Inflation

In a recent post (http://trueeconomics.blogspot.com/2018/05/3518-brics-deck-2018-imf-updates.html) I have provided top level analysis of growth dynamics in the BRICS economies based on the IMF WEO April 2018 update. Here is the section of my BRICS deck with updated view on PMIs, Aggregate Investment and Inflation:

9/10/17: BRIC Manufacturing PMIs 3Q 2017: Lagging Global Growth

With Markit Economics finally releasing China data for Services and Composite PMIs, it is time to update 3Q figures for Manufacturing and Services sectors PMI indicators for BRIC economies.

Summary table:

As shown above, Manufacturing PMIs across the BRIC economies trended lower over 3Q 2017 in Brazil and India, when compared to 2Q 2017, while trending higher in Russia and China.

• Brazil posted second lowest performance for the sector in the BRIC group, barely managing to stay above the nominal 50.0 mark that defines the boundary between growth and contraction in the sector activity. Statistically, 50.6 reading posted in 3Q 2017 was not statistically different from 50.0 zero growth. And it represents a weakening in the sector recovery compared to 50.9 reading in 2Q 2017. Brazil's Manufacturing sector has now been statistically at zero or negative growth for 18 quarters in a row.
• Meanwhile, Russian Manufacturing PMI rose from 51.2 in 2Q 2017 to 52.1 in 3Q 2017, marking fifth consecutive quarter of expansion in the sector (nominally) and fourth consecutive quarter of above 50.0 (statistically). With this, Russia is now back at the top of Manufacturing sector growth league amongst the BRIC economies. However, 3Q 2017 reading was weaker than 4Q 2016 and 1Q 2017, suggesting that the post-recession recovery is not gaining speed.
• China Manufacturing PMI rose in 3Q 2017 to 51.2 from zero growth of 50.1 in 2Q 2017. The dynamics are weaker than in Russia, but similar in pattern, with 3Q growth being anaemic. In general, since moving above 50.0 mark in 3Q 2016, China Manufacturing PMIs never once rose above 51.3 marker, indicating very weak growth conditions in the sector.
• India's Manufacturing PMI tanked again in 3Q 2017 falling to 50.1 (statistically - zero growth) from 51.7 in 2Q 2017. Most recent peak in Manufacturing activity in India was back in 3Q 2016 and 4Q 2016 at 52.2 and 52.1 and these highs have not been regained since then. India's economy continues to suffer from extremely poor macroeconomic policies adopted by the country in recent years, including botched tax reforms and horrendous experimentation with 'cashless society' ideas. 

Overall, BRIC Manufacturing Index (computed using my methodology on the basis of Markit data) has risen to 51.0 in 3Q 2017 on foot of improved performance in Russia and China, up from 50.6 in 2Q 2017 and virtually matching 51.1 reading in 1Q 2017. At 51.0, the index barely exceed statistical significance bound of 50.9. This runs against the Global Manufacturing PMI of 52.9 in 3Q 2017, 52.6 in 2Q 2017 and 52.9 in 1Q 2017. In simple terms, the last quarter was yet another (18th consecutive) of BRIC Manufacturing PMI falling below Global Manufacturing PMI, highlighting a simple fact that world's largest emerging and middle-income economies are no longer serving as an engine for global growth.

Stay tuned for Services PMIs analysis.

3/2/17: Global Composite PMI signals improving growth in January

Over the last four months, I have been suggesting that markets participants pay close attention to Global PMIs, and in particular to the emerging signals of firming global economic growth. January 2017 figures did not disappoint on this front.

I covered Manufacturing PMI yesterday in a post available here.

Today, we got the reading for Services and Composite data. Both printed 53.9, which marks statistically significant expansion and a rise on 4Q 2016 figures, suggesting that global growth is still accelerating. Crucially, new orders are continuing to rise as well.

Per Markit: “The J.P.Morgan Global All-Industry Output Index… posted 53.9 in January, its best reading since March 2015 and up from 53.6 in December. The index has now signalled expansion for 52 consecutive months.”

One caveat is that China data is not included in both Manufacturing and Services PMI readings. But, As shown here: China Manufacturing PMI posted lacklustre performance in January, barely staying above 50.0 level.

Again, quitting Markit, “growth of global service sector business activity improved to a 17-month high in January, offsetting a minor easing in the rate of expansion of manufacturing production.”

Geographically, “the acceleration in the rate of increase in all-industry output was led by the US and Russia. US growth was the sharpest since November 2015, while Russia registered its quickest expansion of economic activity for over eight-and-a-half years. The euro area saw output growth steady at December’s 67-month record, while rates of increase slowed in Japan and the UK. India and Brazil both saw all-industry activity decline at the start of 2017.”

“Global employment rose again in January, with the pace of job creation matching December’s 19-month record.” Again, geographically, employment “…increased in the US, the eurozone, Japan, the UK, Russia and India, but fell further in Brazil.”

Crucially for monetary policy forward, inflation ticked up as well.

Overall, Global Manufacturing PMI remained at rather robust levels of 52.7 in January 2017, comparable to those attained at the end of 4Q 2016 and well above the 51.4 average for the last 4 years. Global Services PMI ended January 2017 at 53.9, which is above already robust 53.5 recorded in 4Q 2016 and above the 4-year average of 53.4. At 53.9, Global Composite PMI is slightly ahead of 4Q 2016 levels (53.6) and is well above 53.0 average for the last 5 years. Thus, across both sectors, the global economic expansion appears to be improving to the upside at the start of 1Q 2017.

Analysis of BRIC Services and Composite PMIs coming up as soon as we have China data.

2/2/17: Global Manufacturing PMI Continues to Signal Potential Growth Recovery in January

Market published Global Manufacturing PMI (Purchasing Managers Index) for January, showing that growth conditions in global manufacturing at the start of 2017 have matched those prevailing in December 2016, with both months posting a PMI reading of 52.7, which is:

1. Statistically above 50.0 (signalling statistically significant expansion in the sector);
2. Statistically above 51.4 - the long run average; and
3. Current reading ties December 2016 reading for a 34-month high and 51st consecutive month of above 50.0 readings.

Some important details from Markit release are:

• “The improvement in business conditions was led by the investment goods sector, where the PMI rose to its highest level in over five-and-a-half years.” This suggests that the globally depressed capex cycle might be turning to the upside, finally, after years of subdued capita investment by companies;
• “The improvement at consumer goods producers was slightly better than that seen in December, while growth in the intermediate goods category lost some momentum.” This suggests that current outlook is for improved short run consumer demand, but a moderation in previous expectations about future growth in demand might be afoot. 
• Growth was concentrated in the US, the euro area and the UK, but slowed in Japan. South Korea, Brazil, Turkey and Greece were “the only nations to register contractions.”
• “…the rate of growth in new business intakes accelerated to a two-and-a-half year high. Part of the increase in demand reflected stronger international trade flows, as new export orders rose at the quickest pace since September 2014.” This fed into “a further increase in outstanding business during January. Backlogs of work expanded for the eighth consecutive month, with growth registered across the consumer, intermediate and investment goods categories.” This is consistent with my view - expressed earlier - that going forward, expectations of future growth in final demand might be moderating.

Additionally, “the latest release sees the launch of a new index tracking business sentiment – the Future Output Index – that is based on a question asking companies if they expect output to be higher, the same or lower in 12 months’ time. The start of 2017 saw positive sentiment climb to a 19- month high, with improvements seen in the US, the euro area, Japan, the UK, India, Brazil and Russia.” I would not hold my breath for the robustness of this indicator for quite some time, as we need to see more historical data building up to assess just what exactly does it tell us about the sector activity.

As the chart above clearly shows, we are only inching toward late-2009-mid 2011 levels of activity, although we have now breached 2015-mid-2016 doldrums trend.

Overall, the data is a welcome news for the global growth, but we will have to wait and see for China and Indonesia Manufacturing PMIs to come out to see more robust picture of what is happening in global trade and manufacturing trends. We also need to see if the current levels of growth can be successfully breached to the upside in February-March. January is, overall, a challenging month to base one’s assessment for broader 1Q economic performance signals due to shorter range of working days and lags from December feeding into January numbers.

2/2/15: Irish Manufacturing PMI: January 2015

Markit/Investec Irish Manufacturing PMI is out for January, posting 55.1, down on 56.9 in December and the lowest reading in any month since May 2014. Still, 55.1 is a strong performance.

3mo MA is now at 56.1 which is slightly worse than 56.5 3mo reading through October 2014, but is ahead of 55.7 average for 12 months through January 2015.

The growth rate is slowing down, but the activity remains robust:

2/12/2014: BRIC Manufacturing PMIs: November 2014

BRIC Manufacturing PMIs are out for November and here are the results:

• Brazil's Manufacturing Activity posted another (3rd in a row) monthly sub-50 reading, falling to 48.7 in November from 49.1 in October. This is the weakest reading since July 2013, matching the same reading in June 2014. 3mo average through November is at 49.0 against 3mo average through August at 49.2. The rot has been long-running: 3mo average through November 2013 was 50.0.
• Russia's Manufacturing PMI rose to 51.7 in November from 50.3 in October. Details were discussed here: http://trueeconomics.blogspot.ie/2014/12/1122014-russia-manufacturing-pmi.html Overall, Russian manufacturing expanded at the second fastest pace of all BRIC economies in November.
• China Manufacturing PMI disappointed as well - coming in at 50.0 in November 2014 down from already anaemic 50.4 in October. 3mo average is at 50.2 - very weak and 3mo average through August was 50.5. 3mo average through November 2013 was 50.7 - also weak by Chinese standards.
• India Manufacturing PMI posted a significant improvement. In October 2014, PMI reading was 51.6 - the fastest growth of all BRIC economies, with November reading rising to 53.3 - again the fastest growth in the BRIC economies. 3mo average through november 2014 is at 52.0 against 3mo average through August of 52.1 and an improvement on 3mo average through November 2013 at 50.2.

Table summarising Manufacturing PMI for October-November:

All in, strong gains in India continuing, while Russia posted surprising uplift in activity in November that requires future confirmation of an upward trend. Brazil is gravely weak, and getting weaker, while China is on an edge of slipping into contraction.

6/11/2014: BRIC PMIs: Heading for a Recession...

BRIC PMIs are out for October, signalling sharp drop-off in economic activity across the EMs. Here is the updated data:

Manufacturing:

• Brazil Manufacturing PMIs slipped deeper into contraction territory for the second consecutive month, dropping from 49.3 in September to 49.1 in October. 3mo average is now at 49.5 compared to 3mo average through July at 49.0. Year on year, 3mo average is down 0.7 points.
• Russia Manufacturing PMI slipped from 50.4 in September to 50.3 in October, also signalling a slowdown in growth, but not an outright contraction as in the case of Brazil.
• China Manufacturing PMI improved to 50.4 in October from 50.2 in September. 3mo average through October is now at 50.3, up slightly on 50.0 on 3mo period through July 2014 and almost unchanged on year ago (50.4).
• India Manufacturing PMI improved from 51.0 in September to 51.6 in October, with 3mo average through October at 51.7, slightly below 51.8 3mo average through July. Year on year 3mo average through October is up very strongly 2.4 points (from 49.2 in August-October 2013).

Overall, Manufacturing activity across BRICs remains highly subdued with India being the only country posting a weak, but positive trend from Q2 2013 on.

Services:

• Brazil Services PMIs fell sharply into contraction territory, from 51.2 in September to 48.2 in October. 3mo average is now at 49.5 compared to 3mo average through July at 50.6. Year on year, 3mo average is down 1.4 points. This means both sides of Brazil's economy are now in contraction, first time this happened since August 2013.
• Russia Services PMI contracted sharply from 50.5 in September to 47.4 in October, also posting an outright contraction as in the case of Brazil. 3mo MA is now at 49.4 which is a shallower contraction signal than 48.1 3mo average through July. A year ago, 3mo average was running at 51.9.
• China Services PMI posted a slowdown in growth to 52.9 in October from 53.5 in September. 3mo average through October is now at 53.5, up on 51.3 for the 3mo period through July 2014 and higher than 52.6 reading a year ago.
• India Services PMI deteriorated from 51.6 in September to 50.0 in October, with 3mo average through October at 50.7, below 51.3 3mo average through July. Year on year 3mo average through October is up very strongly (from 46.4 in August-October 2013).

Overall: Services activity deteriorated in all BRIC economies, while Manufacturing performance deteriorated in two economies and improved in 2 other.

Summary of both PMIs changes is here:

Using a simple total of two PMIs, we can trace overall trends in the BRIC economies (without weighting these by lagged services v manufacturing shares). The dynamics are striking:

Overall economic conditions across the BRIC economies deteriorated in October compared to September, with Russia leading with a sharp downturn. Downward trend in the BRIC economies has now been in place since January 2013, with Russian economy leading in this dynamic from October 2012.

Note: you can read more detailed analysis of Russian PMIs here: http://trueeconomics.blogspot.ie/2014/11/6112014-russia-pmis-signalling-poor.html

5/11/2014: Ireland Manufacturing & Services PMIs: October 2014

With Ireland's Services and Manufacturing PMIs out for October, it is time to update the data set.  As usual, let us start with headline figures:

• Services PMI reading fell slightly to 61.5 in October from 62.5 in September. 3mo average through October is now at 62.1 which is slightly ahead of 3mo average through July 2014 (61.9). Year on year, 3mo average through October is up 2.6%.
• All of the above a comfortably 'growth signals' for Services sectors.
• Manufacturing PMI strengthened from 55.7 in September to 56.6 in October. 3mo average through October is now 1t 56.5 which is up on 55.2 for the 3mo average through July 2014 and is up 3.3% y/y.
• All of the above suggest strong expansion in Manufacturing, contributing to overall economic growth.

Chart below shows deviations in both indices from 50.0 (so positive readings signal economic activity expansion in the sector). 

Next, consider October readings y/y and on 2012 across both sectors:

The above clearly shows that over the last 12-15 months Irish economy has experienced positive contributions to overall economic growth from both sectors: Services and Manufacturing, with the rates of growth now significantly in excess of historical averages and being led more by Manufacturing than Services ('Current" reading is firmly above the trend line). This can be a positive signal when it comes to employment expectations, assuming growth is concentrated more in the sectors relatively free from rampant tax optimisation by the MNCs (aka outside pharma).

3/10/2014: Ireland: Quarterly PMIs and Composite Activity Index: Q3 2014

As promised in the previous post, covering monthly Services PMI (http://trueeconomics.blogspot.ie/2014/10/3102014-services-pmi-for-ireland.html), here is my analysis of quarterly data and my own Composite Activity Index across manufacturing and services sectors, as well as construction sector.

All data reported is based on my calculations using Markit/Investec PMIs.

In Q3 2014, Manufacturing PMI averaged 56.1 which is up on 55.5 average for Q2 2014 and is up on Q3 2013 average of 51.9. Q3 2014 marks the 5th consecutive quarter of expansion in the series.

Services PMI stood at 62.1 in Q3 2014, unchanged from 62.1 in Q2 2014 and up on 58.7 Q3 2013 reading. This quarter marked 15th consecutive quarter of above 50 readings in PMI.

Construction PMI (data through August so far only) is at 62 in Q3 2014, up on 61.2 in Q2 2014 and 51.0 in Q3 2013. This marks 5th consecutive quarter of expansion in the sector.

Composite Activity Index is now at 60.35 in Q3 2014 ex-Construction, up on 60.16 in Q2 2014 and on 59.95 in Q3 2013. This is 18th consecutive quarter of composite indicator above 50.0. Including construction, Composite Activity Index is at 60.38, up on Q2 2014 reading of 60.18 and up on Q3 2013 reading of 56.81.

Chart to illustrate:

On a note of caution: showing just how weak the PMI indices are in predicting Irish growth, here are two charts plotting log changes in PMIs against log changes in GDP and GNP. In all cases, explanatory power of changes in PMIs is weak when it comes to matching the outcomes in growth in the real economy. The same qualitative results hold for levels of PMIs against log changes in GDP and GNP and to levels of PMIs against actual GDP and GNP levels.

2/10/2014: BRIC Manufacturing PMIs: Things are getting slower...

Yesterday, I covered Manufacturing PMIs for Russia (http://trueeconomics.blogspot.ie/2014/10/1102014-russian-manufacturing-pmi.html) so today time to update all BRICs chart:

And from the above, things that were ugly in the merging markets continue to be ugly and get worse.

In September, according to Markit (and all its marketing partners paying for the releases of its data):

• Manufacturing PMIs posted rather significant slowdown in growth in Russia: from 51.0 in July and August to 50.4 in September. However, on a 3mo MA basis, the index is performing better: 3mo average through September (Q3 average) stood at 50.8 (anaemic, but growth) compared to 3mo average through June (Q2 average) of 48.7 and 3mo average through September 2013 of 49.3. M/M slowdown in growth was 0.6 points, which is the second best performance in the BRIC group and September level of index signals second fastest growth in BRIC group.
• In China, Manufacturing PMI posted zero change in September (50.2) on August (52.4). 3mo average through Q3 2014 was 50.7, which is better than 3mo average for Q2 2014 (49.1) and 3mo average for Q3 2013 (49.3). With zero change in growth in PMI m/m, China is the best performer in the group, but its level of PMI is only third best.
• India Manufacturing PMI posted the largest drop in PMIs in September (51.0) on August (52.4) in the group. 3mo average through Q3 2014 was 52.1, which is better than 3mo average for Q2 2014 (51.4) and 3mo average for Q3 2013 (49.4). With PMI falling 1.4 points m/m, India is the worst performer in the group in terms of m/m dynamics, but its level of PMI is still the highest in the group, which is not surprising, given there appears to be a strong upward bias in India PMI readings across data history (see chart).
• Brazil Manufacturing PMI fell from 50.2 in August to 49.3 in September, switching from growth to contraction - the only country posting contractionary PMI reading in the group. Q3 2014 average reading is at 49.5 which is almost identical to the Q2 2014 reading of 49.4 and to Q3 2013 reading of 49.3. M/m Brazil posted the second worst level of decline in PMI and level-wise it is the worst performer in the group.

Notably, there appears to be little level difference across China and Russia in Q3 2013 Manufacturing activity, despite the fact that Russia is under sanctions pressure relating to Ukraine crisis. Both China and Russia outperformed Brazil, but under-performed India in this sector. Adjusting for Indian data apparent bias upwards, there is also little difference between India and China and Russia.

Summary table of changes and levels:

1/9/2014: BRIC Manufacturing PMIs: August 2014

With Brazil PMIs for Manufacturing sector finally in, time to update chart for BRIC Manufacturing PMI (data by Markit):

The above shows several interesting things:

1. Overall BRICs performance (Manufacturing data so far) is a mixed bag: Brazil and China barely above 50.0, signalling very slow growth (if any, as these readings are not statistically distinguishable from 50.0). Meanwhile, Russia showing relatively weak, but growth, while India showing rather modest growth.
2. Brazil posted its first above 50.0 reading after four consecutive months of below 50 readings. But the 'recovery' rate is very weak. Brazil's 3mo average through August is 49.3, which is lower than 3mo average through May 2014 (49.8) and basically unchanged on 3mo average through August 2013 (49.4). All suggests that things are still 'recessionary' in the manufacturing sector in the country.
3. Russia, despite sanctions already in place, posted second fastest growth amongst the BRIC countries in August and third fastest in July. Current 3mo average is 50.4, which better than 3mo average through May 2014 (48.6) and slightly better than 3mo average through August 2013 (50.1). Last two months saw readings above 50.0, breaking the cycle of 8 months of consecutive readings below 50.0. If anything, manufacturing data suggests stronger performance in the wake of sanctions than prior to them. The rot in the sector set on in the case of Russia back in July 2013, well before any troubles in Ukraine started. First round of sanctions saw PMIs falling from 48.5 to 48.3 - minor impact. Second round of sanctions saw PMIs rise from 48.5 to 48.9, while third round of sanctions saw PMIs staying flat at 51.0. 
4. India continued the trend of growing PMIs in August, with 3mo average now at 52.3, up on 3mo average through May (51.6) and up on recessionary 3mo average of 49.6 back in 3 months period through August 2013. All in, this marks the tenth consecutive month of PMIs above 50 for India, with all but one of these months recording PMIs above 51.3.
5. China posted 5 consecutive months of PMIs reading below 50 in January-May 2014. This negative momentum was reversed in June-August with the current 3mo average standing at 50.9, 3mo average though May 2014 at 48.5 and 3mo average through August 2013 at 48.6.

One more point on Russian PMIs dynamics: the switch in trend from below 50 to above 50 took place in July and involved a PMI swing of 1.9 points - the sharpest recovery for all BRIC manufacturing sectors during the last round of recoveries. Despite this, we only have two months of data above 50.0 and it will require at least 2-3 months more to determine if the Russian manufacturing is moving back onto sustainable growth path or if the current improvements are temporary.

2/7/2014: Irish PMIs Q2 2014: Services, Manufacturing, Construction & Composite Index

In two previous posts I covered Services PMI (here) and Manufacturing PMI (here) for Ireland for June 2014.  June data provides us also with Q2 average levels of activity as measured by PMIs, so let's cover this here.

Q2 2014 Manufacturing PMI averages came in at 55.5, marking the fourth consecutive quarter of readings above 50.0. Q1 2014 Manufacturing PMI averaged at 53.7. Q2 2014 average is now the highest of any quarter since Q1 2011.

All of this indicates that Industry contribution ex-Construction to the GDP should posting growth over H1 2014. And this is good news.

Services Q2 2014 PMI came in at 62.1 - rapid pace of growth - up on 59.9 in Q1 2014 and significantly up on 54.3 in Q2 2013. Again, these are strong indicators of growth in the sector in H1 2014 

And this growth accelerated in Q2 compared to Q1: in Q1 2014 y/y expansion in Services PMI was 10.4% and in Q2 2014 it rose to 14.4%, also in Q1 2014 Manufacturing PMI rose 7.2% y/y and in Q2 this rate of growth was 12.4%.

Finally, Construction PMI (we have these with one month lag, so Q2 figures are based on April-May averages, firmed up substantially, reading 61.9 in Q2 2014 compared to 57.6 in Q1 2014 and 42.4 in Q2 2013. Year on year rates of growth a massive: 28.8% in Q1 2014 and 45.8% in Q2 2014.

All in, the data for Q1 appears to be in line with growth registered in QNA realised today (more of this later) and Q2 is encouraging in so far as it shows acceleration in growth on Q1.

3/1/2013: BRIC PMIs signal nasty end to 2013

Via Markit Economics:

The above shows the problem with the BRIC grouping: general lack of growth momentum, albeit driven by two different sets of forces.

For Brazil and Russia: domestic economic expansions are starting to fizzle out as debt (Brazil), public spending (Brazil) and consumer spending (Russia) are no longer capable of sustaining previous rates of growth. For India and China, growth is also a challenge, but here core drivers are lack of consumer demand growth in advanced economies (China), too much debt and late stage development of assets bubble (China), reduced capacity for services exports growth (India) and dysfunctional domestic markets (China and India). Note that India's relative outperformance in the group comes on foot of longer and deeper contraction in more recent past.

This is uglier than the Euro area effects when it comes to global growth. Core point is: who will be driving growth around the world in 2014?.. Unless the above momentum is reversed, the answer to that question is: no one in particular...

3/5/2013: Irish Employment in Services & Manufacturing: April PMIs

On foot of both NCB Manufacturing PMI and NCB Services PMI for Ireland for April 2013, let's take a look at underlying employment conditions signals from the two core sectors of the economy.

From the top:

Manufacturing and Services PMI readings continued to diverge in April for the 5th consecutive month, with headline PMI readings for:

• Manufacturing PMI falling to 48.0 in April from 48.6 in March marking the second consecutive monthly sub-50 reading. 12mo MA is now at 51.3 and Q1 2013 average is at 50.1 so things are moving South for Manufacturing in recent months.
• Services PMI rising to 55.2 in April from 52.3 in March. 12mo MA is at 53.3 and Q1 2013 average is 54.2, implying PMI readings moving North for Services in recent months.

These trends in overall PMI readings were broadly repeated in the Employment sub-index dynamics:

• Employment index for Manufacturing slipped to 46.9 in which is significantly below 50.0 and marks second consecutive month of declines and sub-50 readings. In the last 6 months, index declined 4 times, but was below 50.0 only in two months. 12mo MA is at 51.3, but Q1 2013 average is 50.1 and this comes after 52.0 average for Q4 2012. So things are sliding and sliding rather fast.
• Employment index for Services, in contrast, posted a robust increase in April to 55.2 from 52.3 in March. April marked ninth consecutive month of employment increases being signaled by Services PMI, which is a good strong trend. Thus, 12mo MA is at robust 53.3 and Q1 2013 average is at 54.2 - a slower rate of growth on Q4 2012 average of 56.0, but statistically significant growth nonetheless.

Tables detailing employment indices changes below:

Manufacturing:

Services:

Now for the reminder: Employment in Services has far less tangible connection to actual sector activity than Employment in Manufacturing, with volatility-adjusted 1 point increase in respective headline PMI implying 0.67 units increase in employment index in Services against 0.87 units rise in manufacturing employment index over historical data horizons:

Click on the chart to see in detail the overall dynamics y/y for April in employment and PMI indices, clearly showing the switch between Services and Manufacturing in terms of the sectors' position relative to economic recovery. If in 2011 Services were a drag on growth and employment, while Manufacturing was experiencing strong gains, by 2013 Services became the core driver for positive momentum in both growth and employment, with Manufacturing pushing economic activity and employment down.

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).