6/1/21: BRIC: Services PMIs: 4Q 2020

 

BRIC's manufacturing PMIs for 4Q 2020 were covered here: https://trueeconomics.blogspot.com/2021/01/4121-bric-manufacturing-pmis-4q-2020.html. Now, to Services PMIs:

• Brazil Services PMI rose from 47.5 in 3Q 2020 to 51.4 in 4Q 2020, with aggregate 2020 levels of activity still significantly below 2019 levels. At 51.4, the index is barely statistically above 50.0 (95% confidence bound is 51.3). However, the latest quarterly reading is the first nominally above 50.0 after three consecutive quarters of sub-50 readings. 
• Russia Services PMI crashed in 4Q 2020 from 56.8 in 3Q to 47.7. Statistically, Russian services sector is contracting and it is contracting rapidly. In the entire 2020, there were three quarters of deeply sub-50 readings against one quarter of above 50.0 expansion. Services sector reading is basically identical to 47.6 recorded in Manufacturing sector, which means that in 4Q 2020 there was no 'comfort zone' in the Russian economy in terms of growth.
• India Services PMI rose significantly in 4Q 2020 compared to 3Q 2020, from 41.9 to 53.4.  However, this growth is unlikely to bring India's services activity anywhere near pre-Covid19 levels. 
• China Services PMI rose for the third consecutive quarter in 4Q 2020. In 2Q 2020, China's Services PMI was at 52.6, which increased to 54.3 in 3Q 2020 and to 57.0 in 4Q 2020. Nonetheless, it is still doubtful that Chinese services activities have fully recovered from the pandemic as of the end of 2020.
• Overall, BRIC Services Activity Index based on PMIs and respective GDP shares in the global economy rose for the second quarter in a row from 51.0 in 3Q 2020 to 54.8 in 4Q 2020. This marks some recovery from the Covid19 pandemic impact, although this recovery remains incomplete. BRICs have - as a group - outperformed Global Services PMI which rose from 51.4 in 3Q 2020 to 52.3 in 4Q 2020.

5/11/20: BRIC: Services PMIs October

In the earlier post, I covered BRIC economies manufacturing PMIs for October: https://trueeconomics.blogspot.com/2020/11/31120-bric-manufacturing-pmis-october.html. Now, leet's take a look at Services PMI.

As the chart above illustrates:

• Brazil Services PMI rose from 47.5 in 3Q 2020 to 52.3 in October. Prior to October, Brazil's services sector was in a contractionary territory for three consecutive quarters. October marks the second month of above 50.0 readings, although statistically-speaking, September reading was indistinguishable from 50.0 stagnation / zero growth level.
• Russian Services PMI posted a sharp contraction, falling from 56.8 in 3Q 2020 to 46.9 in October. Russia enjoyed just three months of > 50.0 readings in July-September 2020, implying that the economy is nowhere near a V-shaped recovery from the pandemic and that things are getting worse, not better in the services sectors. Even worse dynamics apply to Manufacturing where Russia has not seen sustained > 50 readings since March 2019.
• India Services PMI rose to 54.1 in October, marking the first month of above 50.0 readings since February 2020. Given cumulative nature of the PMIs, October rebound is nowhere near being sizeable enough to start closing the pandemic-induced drop-off in economic activity. India's services have now posted seven months of contraction in 2020, compared to four months for Manufacturing. October marks the first month since February with both indices above 50.0.
• Chinese Services PMI rose to 56.8 in October, compared to 54.8 in September, marking 6th consecutive month of both Manufacturing and Services PMIs above 50.0 line. 

Overall, BRIC Services Activity Index (a measure of Services sectors activity calculated by me based on monthly Markit PMI data and country-specific share of the world GDP, PPP-adjusted) rose to 54.9 in October compared to 51.0 in 3Q 2020, marking a second month of > 50.0 readings and accelerating growth momentum. October BRIC reading is in excess of the Global Services PMI reading of 52.9, implying that as a group, BRIC economies are contributing positively to global economic growth momentum, although both Brazil and Russia are pushing BRIC reading down, compared to Global Services PMI.

14/10/20: BRIC: Services PMIs Q3 results

 

BRIC Manufacturing has rebounded strongly from thee pandemic lows, as covered in this post here: https://trueeconomics.blogspot.com/2020/10/141020-bric-manufacturing-pmis-q3.html. Services PMI for the BRIC economies signal similar, albeit weaker rebound in July-September:

Brazil Services PMI stayed in the recession territory in 3Q 2020, with index reading coming in at 47.5, up on 30.3 in 2Q 2020, but still marking a third consecutive quarter of sub-50 readings. Put simply, unlike manufacturing that is showing rather incredible signs of the recovery, Brazil's services sectors continue to show ongoing contraction, building on 6 consecutive months of contracting activity through August 2020. September monthly reading at 50.4 is statistically indistinguishable from zero growth line of 50.0. In summary, Brazil's services sector is not in a recovery so far.

Russia Services PMI posted very strong recovery signals in 3Q 2020, although September reading slipped to 53.7 (fast growth) from blistering 58.5 and 58.2 in July and August, respectively. 3Q 2020 Russia Services PMI was at 56.8 marking a sharp turnaround from 36.0 in 2Q 2020. This is the fastest pace of quarterly expansion since 1Q 2017.

India Services PMI remains in contraction, with 3Q 2020 reading of 41.9, an improvement on sharper rates of deterioration in 2Q 2020 at 17.2. September marked seventh consecutive month of sub-50 readings in Services sector in India.

China Services PMI came in at 54.3 in 3Q 2020, up on 52.6 in 2Q 2020, marking second consecutive quarter of recovery from the pandemic lows of 1Q 2020 when the index fell to 40.4. 

Overall, BRIC Services Activity Index - an index compiled by me based on GDP shares and Markit monthly PMI data - rose from 40.4 in 2Q 2020 to 51.0 in 3Q 2020. Given the nature of PMIs as signals of monthly changes in activity, 3Q 2020 reading is consistent with the BRIC block services sectors recovering only partially from the pandemic lows. BRIC Services Activity Index ended 3Q 2020 at the levels slightly below the Global Services PMI which stood at 51.4. Global services sectors are also showing more rapid rate of quarterly recovery, rising from 35.6 in 2Q 2020 to 51.4 in 3Q 2020.

8/9/20: BRIC: Services PMIs

Services sector activity as reflected by PMIs from the BRIC economies is now available for August, so here are the top numbers: 

In terms of actual readings, and do recall, quarterly PMIs referenced above are averages over three months period, so 3Q 2020 data is only covering July-August 2020.

• Brazil Services PMI was nowhere near the insane reading posted by the country Manufacturing PMI (see post here: https://trueeconomics.blogspot.com/2020/09/8920-bric-manufacturing-pmis.html). Services index came in at 46.0 for the period of July-August (3Q 2020 to-date), up on disastrously low 30.3 in 2Q 2020, but still well below 50.0 line of zero growth. Reading PMIs, this means that the sector activity continued to contract in 3Q 2020 so far, on top of the already sharp contraction experienced in 1Q 2020 and 2Q 2020.
• Having set no records in Manufacturing, Russia Services PMI came out with a massive and seriously surprising print to the upside in August. As the result, 3Q 2020 to-date Services PMI rose to 58.4 for the highest reading since 2Q 2009. As massive as the print is, it is pretty 'normal' for volatile Russian services data. Still, the recovery it signals is sharp, as 2Q 2020 COVID19 trough was at a misery-inducing 32.0. The implied trough-to-peak swing is jaw-dropping 26.4 points.
• China Services PMI rose in the first two months of 3Q 2020 to 54.1 from already expansionary 52.6 in 2Q 2020. Trough-to-peak COVID19 swing is now at 13.7 points, and the latest reading is the highest since 4Q 2010, when the index stood at 54.2.
• India Services sectors are still in sharp contraction. Recall: in 2Q 2020, India Services PMI crashed, smashed, collapsed, melted down, or whatever else you might call, falling from 54.1 in 1Q 2020 to 17.2 in 2Q 2020, the lowest reading for any BRIC economy in any sector at any time. So far, in 3Q 2020, the index is running at 38.0, which implies that India's services sectors continue to contract from already reduced activity in prior quarter. In the light of this super-sharp recessionary dynamic, it is impossible to reconcile Manufacturing sector PMI and Services sector PMI in this economy.

Overall, BRIC Services Activity Index - a measure I compute using a range of data inputs, including Markit's PMIs - came in 49.9 in 3Q 2020 (to-date), an improvement on 2Q 2020 reading of 40.4 and above 1Q reading of 44.9. Nonetheless, across the four largest EM economies, Services activity continues to contract for the third quarter in a row, nominally, and it is standing still statistically. In this, BRIC economies are distinct from the Global Services PMI indicator, which rose from 35.6 in 2Q 2020 to 51.3 in 3Q 2020 (to-date). 

Stay tuned for BRIC Composite PMIs next.

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 Services PMI 3Q 2017: Another Quarter of Weaker Growth

Having covered 3Q 2017 figures for BRIC Manufacturing PMIs in the previous post, let’s update the same for Services sector.

BRIC Services PMI has fallen sharply in 3Q 2017 to 50.8 from 52.1 in 2Q 2017. This is the lowest reading since 2Q 2016 (when it also posted 50.8). The drivers of this poor dynamic are:

• Brazil Services PMI remained below 50.0 mark for the 12th consecutive quarter, rising marginally to 49.5 in 3Q 2017 from 49.0 in 2Q 2017. Current reading matches 1Q 2015 for the highest levels since 1Q 2014. Statistically, Brazil Services PMI has been at zero or lower growth since 1Q 2014.
• Russia Services PMI fell to 54.0 in 3Q 2017 from 56.0 in 2Q 2017 and 56.8 in 1Q 2017, indicating some cooling off in otherwise rapid expansion dynamics. The recovery in Russian Services sectors is now 6 quarters long and overall very robust.
• China Services PMI decline marginally from 52.0 in 2Q 2017 to 51.6 in 3Q 2017. This is consistent with trend established from the local peak performance in 4Q 2016. Overall, Chinese Services are showing signs of persistent weakness, with growth indicator falling below statistically significant reading once again in 3Q 2017.
• India Services sector has been a major disappointment amongst the BRIC economies, with Services PMI falling from 51.8 in 2Q 2017 to a recessionary 48.0 in 3Q 2017. The Services PMIs for the country have been rather volatile in recent quarters, as the economy has lost any sense of trend since around 4Q 2016.

Table below and the chart illustrate the changes in Services PMIs in 3Q 2017 relative to 2Q 2017 and the trends:

With Global Services PMI remaining virtually unchanged (at 53.9) in 3Q 2017 compared to 2Q 2017 (51.8), with marginal gains on 1Q 2017 (53.6) and 4Q 2016 (53.5), the BRIC Services sectors are showing no signs of leading global growth to the upside since 3Q 2016. For the sixth consecutive quarter, Russia leads BRIC Services PMIs, while Brazil and India compete for being the slowest growth economies in the services sectors within the group.

As with Manufacturing, BRIC Services sectors show no signs of returning to their pre-2009 position of being the engines for global growth.

Stay tuned for Composite PMIs analysis for BRIC economies.

7/3/15: Irish Services Sector Activity & PMI: January 2015

Irish Services Activity Index for January came out yesterday, offering some interesting data reading.

Contextually: Services PMI has averaged 62.2 in the 3 months through February 2015 and it averaged 61.9 for the period of 3 months through November 2014 - both showing blistering growth in the sector.

Now, January Services Activity Index came in 12.6% ahead of the same level in January 2014. 2 mo average through January (comparative to PMI averages we have) is 119.6 which is 9.44% ahead of 3mo average through the same period of 2014. This is rapid growth and it accelerated in December-January as chart below shows.

The acceleration was broadly-based:

• Information and Communication sub-sector activity rose 21.2% y/y with a massive 10.2% jump in m/m terms in January alone. The sub-sector growth rate is around 8.11% y/y in terms of 3mo average through January.
• Professional, Scientific and Technical sub-sector activity posted a big 14.0% jump y/y in January and was up 11.8% m/m. 3mo average through January was up 13.1% y/y.
• Wholesale and Retail Trade etc sub-sector activity rose 8.8% y/y and 9.5% m/m - also strong growth, although 3mo average through January was up weaker 7.2% y/y.
• Transportation and Storage sub-sector activity rose 8.4% y/y but was down 1% m/m, having previously posted rapid growth in November and December. 3mo average through January 2015 is up 16.5% y/y.
• Accommodation and Food services activity was up 14% y/y and down 0.33% m/m in January, with 3mo average through January 2015 standing 13.9% above 3mo average through January 2014.
• Administrative and Support services activity rose only 2.9% y/y and was down 0.8% m/m, with 3mo through January 2015 up just 2.1% y/y.

So, in summary - January figures show a very surprising (and thus suspicious) jump in overall activity across a number of sectors. CSO provides no explanation as to this jump nor any warnings on it. My suspicion is that we are seeing the effects of the infamous 'knowledge development box' introduction in Budget 2015 with MNCs pushing forward more aggressive tax optimisation strategies through it, whilst maintaining previous tax arrangements. I will post a small note on this later, so stay tuned.


Now, an update of the validity of PMIs as a measure of Services Activity recorded in the sector. Table below shows correlations between Services Activity Indices and Services PMIs

As the table shows, there is very little relationship between Services PMIs performance (I also did same analysis for rates of change in the indices that show even worse performance for PMIs as indicators of current or future actual activity) and actual Services sector activity. Out of 84 correlations, 53 are either negative of statistically zero and only 13 have strong positive correlation with either levels of activity or growth in activity. Crucially, PMIs perform stronger (relatively speaking) in correlations with levels of activity, rather than growth rates in activity (in which they perform absolutely disastrously across all time horizons and lags). About the only areas where PMIs are useful in relating to the level of activity (but not growth in activity) are: strongly with ICT, weakly with Admin & Support services and overall Services. Which suggests strong bias in PMIs toward MNCs-dominated ICT services sub-sector. Another miserable point for PMIs: they are more indicative of contemporaneous activity than providing insight into future activity.

8/2/15: BRIC Services PMIs: Poor Performance in January

BRIC PMIs for January are continuing to show divergence in growth across the four economies. I have covered manufacturing sector trends here: http://trueeconomics.blogspot.ie/2015/02/8215-bric-manufacturing-pmis-one-cold.html.

Now, let's take a look at Services PMIs:

• Brazil Services PMI fell to 48.4 in January from 49.1 in December signalling deeper contraction and marking fourth consecutive month of sub-50 readings. Current 3mo average is at 48.7 and this compares poorly to the already contractionary 49.7 3mo average through October 2014. January 2014 3mo average was 51.2. 
• Russian Services PMI dropped significantly from already poor reading of 45.8 in December to strongly contractionary 43.9 in January. 3mo average through January 2015 is at 44.7 and this compares unfavourably to 3mo average through October 2014 at 49.5. We now have 4 consecutive months of sub-50 readings in the series. 3mo average through January 2014 was 52.2. Overall, substantial decline in Services activity as signalled by the PMI reading.
• China Services PMI stayed declined from 53.4 in December 2014 to 51.8 in January 2015. This is the weakest performance since July 2014. 3mo average through January is at 52.7, virtually unchanged on 52.6 average 3 mo reading through October 2014 and an improvement on 51.4 3mo average through January 2014.
• India Services PMI improved from 51.1 in December to 52.4 in January, with 3mo average through January reading at 52.0 - ahead of 3mo average through October 2014 (51.1), and ahead of 3mo average through January 2014 (47.4).
• Overall, Russia (-1.9 points), China (-1.3 points) and Brazil (-0.7 points) posted declines in Services PMIs in January compared to December 2014, while India (+1.3 points) posted an increase. 
• Conclusion: BRIC Services sectors are still suffering from weak growth conditions, similar to those observed in December, with Russia being the weakest, followed by Brazil, and with very weak and weakening growth in China, set against improving growth in India.

Chart and summary table below:

3/12/2014: Russia Services & Composite PMIs: November

Pretty tough news for Russian Services and Composite PMIs for November.

As a reminder, Manufacturing PMI for November posted a nice surprise, rising to 51.7 in November from 50.3 in October. However, as I noted in the analysis of Manufacturing figures here: http://trueeconomics.blogspot.ie/2014/12/1122014-russia-manufacturing-pmi.html the devil was always in the services PMI data.

Services PMI came in significantly to the downside. November Services PMI reading fell to an abysmal 44.5 from already poor 47.4, marking second month of contraction, and a sharpest rate of contraction since May 2009.

3mo MA is now at 47.5, and 3mo MA for the period through August is at 49.9, which means 6 months of continued declines (on average) in the sector activity. In 3mo through November 2013, the index averaged 52.3.

Composite PMI, driven by Services downside, fell off the cliff from 49.1 in October to 47.6 in November, marking an outright statistically significant contraction. 3mo average through November 2014 is at 49.2 against 3mo average through August at 50.8 and 3mo average through November 2013 at 52.2.

All three PMIs taken together show continued strong trend to the downside, a trend that was clearly established in Q4 2012 first on foot of structural weaknesses, further reinforced by sanctions and counter-sanctions, plus now being strongly propelled by the drop in global energy prices. Additional driver to the downside is the global environment that currently strongly disfavours all BRICs (here is my analysis of BRICs Manufacturing PMIs: http://trueeconomics.blogspot.ie/2014/12/2122014-bric-manufacturing-pmis.html and stay tuned for analysis of BRICs composite and services data coming up later this week).

Overall, the weaknesses in Russian economy continue to persist and the downside to the Composite PMI index suggests that we are now likely to see contraction in economic activity in Q4 2014. As I predicted before, official recession will most likely be unavoidable in Q4 2014 - Q1 2015. The question now is at what rate the economy will be contracting.

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.

2/7/2014: 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.

2/7/2014: Irish Services PMI: June 2014

Markit/Investec released PMI for Services for Ireland, so we can update now monthly series for both Manufacturing (see post here) and Services, as well as (in the follow up post to come next) the Composite Activity Index for the economy.

On Services PMI side:

• Main activity indicator firmed up to 62.6 from 61.7 in May, marking the highest level of PMI since February 2007. 
• 3mo MA is now at 62.1 against previous of 59.9. Year on year, 3mo MA is up 7.8 points
• Compared to the full sample average (54.1) current activity levels are running well above the levels consistent with 'normal' growth and these are statistically significantly above the expansion line. 

As chart below shows, we are now into expansion territory for both indices, which is a marked change on June 2013 and June 2012.

Next post will cover Q2 data for Services and Manufacturing PMIs and Composite Index.

15/5/2014: PMIs and actual activity: something is still amiss...

Services Activity vs Services PMIs... something is seriously amiss... still...

Notice how the activity has fallen in Q1 2014 compared to Q1 2013 and yet PMIs expanded even further into growth territory?..

Notice how in ALL 1st quarters since 2011 (recovery on-set), PMIs grossly over-estimated actual changes in Services Activity, signalling slower growth in Q1 2012 y/y against actual activity rising sharply, signalling greater growth in Q1 2013 against actual growth rate falling short of PMI-signalled one, and lastly completely contradicting actual outrun in Q1 2014.

Notice how since the onset of the 'recovery' - PMIs-consistent average growth (vertical reading on the trend line, for every underlying level of PMIs) is always below actual activity recorded...

Go figure the puzzle, but my suspicion is that the survey is skewed too heavily to MNCs...

5/9/2013: Services PMI: August 2013

With a delay (due to extenuating circumstances) - here's my analysis of dynamics of the Services PMI for August for Ireland.

Yesterday's reading on Services PMI was spectacular by all measures:

• Headline  index rose to 61.6 in August 2013, the highest reading since February 2007 and 19th highest reading in history of the index.
• August reading marked the third consecutive month of index reaching statistically significant levels of growth.
• 12mo MA is now at expansionary 55.6, 6mo MA at 55.7 and 3mo MA at 58.0. These readings should signal a break in the third recessionary dip we have experienced.
• Current 3mo MA is solidly ahead of 3mo MA through May (53.4) and is ahead of same averages for 2012, 2011 and 2010.

The most critical bit, however, is that this is the first time now that the PMI has breached the levels consistent with the pre-crisis activity. This is not to say we are heading for 4.4-4.6% annual GDP growth, but it is significant nonetheless. 

All-in - very solid expansion, very solid reading and starting from actually high levels of activity to begin with.

We do not have - courtesy of Investec and Markit deciding to cut back the information they release to us, mere mortals - the actual composition details or the breakdown by sector. However, per Markit release, most of the growth is accounted for by booming IFSC. The overall Services PMI is very significantly skewed in the direction of MNCs (as I showed on a number of occasions).

7/7/2013: Services PMI for Ireland: June 2013

Necessity is a mother of all inventions. Necessity of recent commands that those of us who care to do an in-depth analysis of Irish data have to scale back analysis of the PMIs. The reason for this is that Investec and Markit are no longer publishing in a general release any relevant data concerning the PMIs components. In the case of Services PMIs, Markit went even farther:

All that is left for any non-profit analysts like myself is to take the few numbers still being reported on an ad hoc basis, and make most of them. Sad to see years of data & analysis models going to waste because Markit & Investec don't really understand how to work with new media and independent analysts.


Here is the updated trends analysis for Services Sectors PMI (my earlier post on Manufacturing PMIs is here):

• 12mo MA for the series stands at 54.0, which is statistically indifferent from 54.9 recorded in June 2013. 
• June 2013 reading is statistically significantly above 50.0, so no denying it, the sector is expanding.
• 3mo MA currently and 54.3, which is also statistically significantly different from 50.0, and is virtually unchanged on 54.2 3mo MA through March 2013.
• The 3mo MA through June 2013 (or Q2 2013 average) is ahead of same period 2012 (50.3), 2011 (51.0) and 2010 (52.9). All pointing in the good direction, then.

Charts below illustrate the trends:

Chart above shows that, despite the robust growth, we are in a secular slowdown in underlying growth when it comes to Services sectors. In pre-crisis period, average PMI ranged 7.6 points above 50.0, which was consistent with roughly GDP growth of 4.4-4.6 percent per annum. Since the 'recovery on-set, average PMI is above 50.0 by 1.9 points, which is not statistically significantly distinct from zero growth in the sector. it is also consistent with average GDP growth of ca 1.2-1.5% per annum.

Now, keep in mind: these are Services, heavily dominated by exports-driven ICT and Financial Services - in other words, this is the sector of the economy where the 'exports-led recovery' story has been the rosiest since the 'official' end of the crisis.

Stay tuned for my combined series analysis for Manufacturing and Services PMI.

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.

7/5/2012: Analysis of April Irish PMIs (4): Profitability

This is the last post on April 2012 PMIs. In the first and the second posts, I covered headline index readings forManufacturing PMI and Services PMI for April 2012. In the third post, I looked at the Employment sub-indices for both sectors. This post will focus on profitability conditions, an index I derived from the PMI data.


April 2012 saw profit margins conditions deterioration slowing down in Services from -15.06 in march to -11.96 in April. 12mo MA is now at -15.9, shallower than the average deterioration in profit margins during the pre-crisis period (-17.8), but deeper than -14.7 average reading for the period since January 2008. Overall, -11.96 April 2012 reading is the slowest pace of profit margins deterioration recored since October 2010. 3mo MA is now at -13.8 and this marks a significant improvement on -19.8 deterioration for 3mo MA a year ago.

Manufacturing profitability index has moved from -24.84 in March 2012 to -22.86 in April 2012, marking the second sharpest decline since March 2011. 12mo MA is now at -17.1, while 3mo MA is at -23.3. This compares against pre-crisis average reading of -11.6 and January 2008-present average of -14.55.

So on the net, profitability conditions continue to deteriorate, but deterioration in Services is less pronounced and de-accelerating continuously compared to historic trends. Deterioration in Manufacturing profit margins continues unabated and is running well beyond historical averages.


The above suggests that while some positive momentum is possible for employment in Services sector, it is unlikely that profits conditions will support much of an employment uptick in Manufacturing.

7/5/2012: Analysis of April Irish PMIs (3): Employment

In the last two posts I covered headline index readings for Manufacturing PMI and Services PMI for April 2012. In this post, I am looking at the Employment sub-indices for both sectors.

Employment index rose to 52.9 in Manufacturing from 51.2 in March. The move is against 49.5 12mo MA and 50.0 average for Q1 2012, suggesting some expansion in Manufacturing employment. The change comes coincident with a decline in the rate of growth in overall sector PMI to 50.1 from 51.5 in March.

In Services, employment index declined to 50 from 51.9 in March 2012. The index 12mo MA is at 47.9 and Q1 average was 48.1. In contrast to Manufacturing, decline in Employment growth rate came against an improvement in PMI from 52.1 in March to 52.2 in April.

Short-term changes in the series, however, are pretty volatile. Chart below shows the counter-moves in the two sectors:

and the chart below plots relationship between Employment and Exports:

The good news is, March and April 2012 mark two consecutive months when exports expansions in both sectors led to above 50 readings in employment as well. Last time that happened on a monthly basis was in April 2011 and last time it happened in two consecutive months was in October 2007.

If sustained over the next 2-3 months, the trend might shift firmly to the upside.

7/5/2012: Analysis of April Irish PMIs (2): Core Services

Previous post dealt with the high level trends in Manufacturing PMI for Ireland. In this post we look at the core data for Services PMI.

Back in March, markit - the agency releasing Irish PMI data for NCB - headlined the changes in the Services index with a rather bombastic "Growth of Activity Sustained in March, and Optimism Hits a 22-month High". Of course, such was the booming time in Irish economy a month ago.

Fast forward one month to April and the headline remains bombastic: "Activity Growth Maintained in April as New Business Rises for Third Month Running"... Ok... so...

Headline PMI in Services (Business Activity index) improved from 52.1 in March to 52.2 in April, which is good news nominally, but statistically still indistinguishable from 50. Good thing is, the moving averages are a bit stronger along the just-above-50 trendline. 3mo MA is at 52.5, 12mo MA at 51.3, and 3mo MAs for 2011 and 2010 are all below the current running at 52.1 and 49.8 respectively. So business activity is indeed somewhat on the rise, albeit a very shallow rise.

Overall, headline Services Activity has been running on average above 50 since June 2009. Anyone noticed the boom, yet?

New Business Activity firmed up to 52.7 in April, from 52.1 in March, marking the third consecutive month of above 50 readings. 12mo MA is at 50.0 and 3mo MA is at 52.8, ahead of same period 3mo average in 2010 and 2011 (49.1 and 51.9, respectively). All, however, remain statistically indistinguishable from 50.

Again, trend pattern in New Business sub-index is identical to the pattern in overall Business Activity index - flat just above 50 since, roughly Q2 2011. The snapshot of more recent data illustrates, next.

Input-output prices are both moderating in trend, but input prices continue to expand, while output prices continue to post significant deflation. Profit margins, therefore, are shrinking more and more - the pattern that is running solidly since August 2009. More on this in future posts, however.

On core components of PMI: New Export Business growth moderated, but remained above waterline at 54.3 in April, down from 55.5 in March 2012. Both monthly readings were statistically significantly above 50, the same as in February. 12mo MA is now at 52.7 - barely statistically significantly above 50, while 3mo MA is at 55.0 - strong reading, ahead of 54.6 in 3mo through April 2011 and 52.8 reading for the same period of 2010.

As mentioned earlier, Profitability remained in the contraction territory, posting a reading of 47.5 in April, worse than 47.9 in March. Last time Profitability sub-index posted a reading above 50 was in December 2007.

Employment sub-index declined to 50.0 in April 2012, down from 51.9 in March 2012. 12mo MA is at 47.9 and 3mo average through April 2012 is at 49.9. This is virtually identical to 3mo MA through April 2011 which came in at 49.8 and is better than a rapid contraction-signaling 43.7 for the sub-index 3mo MA through April 2010.

Confidence slipped to 64.1in April 2012  from 70.4 in March. The series reading is now at 3mo low, but ahead of 12mo MA of 62.5. 3mo MA through April is very strong 67.1, while 3mo average through April 2011 was 66.5 and for 2010 period it was at 64.2. Overall, business confidence is relatively inflated indicator, as shown in the chart below. The indicator has relatively strong coincidental connection - in historical data - to the same period Business Activity index.

Overall, Services PMIs are showing stronger performance in the sector than in Manufacturing, but the numbers are more volatile and trending along the flatline. Business expectations continue to out-perform actual activity and exports orders, although this is hardly a new trend. With profitability severely constrained and actually deteriorating, I wonder if the 50+ readings in the last two months in Employment sub-index are credible.