30/8/2013: How's that 'credit supply' to the economy promise going?

On foot of my analysis of the credit extended to Irish Private Sector Enterprises and to SMEs (see PSEs analysis here and SMEs analysis here), I was asked if I can pool together the two datasets to provide a summary of the 'Government performance table' on both.

Here it is. All changes are referenced to Q2 2011 in levels (Euro millions) and the colour codings are: bold green marks expansion on Q2 2011, bold red - contraction.

As you can see, only two sectors of the economy experienced an overall increase in credit levels: Manufacturing and Human Health & Social Work.

As I noted in the previous post: Truth be told, neither this nor any other Government can stop the deleveraging in the Irish private sector economy and this deleveraging will have more adverse impact on SMEs than on larger enterprises. But, truth be told, the Irish Government is not exactly keen on this truth and is insisting that it can 'unlock' credit flows... Two years in, we are still waiting...

Any source

29/8/2013: Credit to SMEs in Ireland: Q2 2013

Earlier today, I debunked the myth that we are experiencing any sort of significant uptick in private sector enterprise investment on the foot of poor credit supply figures for Irish private sector enterprise. You can read my analysis on this here: http://www.fergco.co/2013/08/2982013-credit-to-private-enterprises.html. However, let us recall that the current Government came into the office rattling sabres on the high goals of setting banks straight on SMEs credit.

How are we doing on this front?

Here's a handy summary for Q2 2013 changes in credit outstanding to the SMEs (green bold marks sectors where there has been any improvement - either quarterly or annual):

Spotting any significant improvements in access to credit? Me neither.

What about longer trends? Here are the charts:

Total credit is down.

Manufacturing credit is up and off the bottom levels, but the overall levels are tiny, minuscule, irrelevant to the aggregate economy. Primary sectors credit is down over longer time range and flat since ca Q2 2011.

No love from the banks for property, construction, and now less love for financial intermediaries too.

No need to describe what's going on in wholesale, retail and hospitality sectors.

Education faring better, but at insignificant levels of activity to start with. Health is at the bottom of the empty swimming pool and not even flapping arms...

Even the 'white knights in shining armour' that are exports drivers and generators and the darlings of our development agencies: business services and ICT are starving of credit.

So run by me again: what are the banks doing to respond to the Government loud calls to do their bit for the economy, to support recovery etc? Oh, here's a table showing what happened in SME credit per sector since Q2 2011 (in bold red - sectors that saw decline in credit, in bold green - those where there was an increase in credit):

Truth be told, neither this nor any other Government can stop the deleveraging in the Irish private sector economy and this deleveraging will have more adverse impact on SMEs than on larger enterprises. But, truth be told, the Irish Government is not exactly keen on this truth and is insisting that it can 'unlock' credit flows... Two years in, we are still waiting...

Any source

29/8/2013: Credit to Private Enterprises in Ireland: Q2 2013

Credit supply figures for credit extended to Irish businesses are out and make a depressing reading, once again.

Taken from the top, here's the summary of all latest (Q2 2013) changes:

I marked in green bold only those observations where there has been any sort of a positive movement either y/y or q/q. There are only five such subsectors: Water, Sewage & Waste Treatment, etc (although q/q the sector is again down on credit), Transport & Storage (although the sector is down y/y), Information & Communication (solid y/y rise, with a big question as to whether the credit increase is accounted for by the Eircom going back into leveraging up), Education (solid y/y gain, weak q/q growth) and Health and Social Work (down q/q, but up y/y).

We hear much about the fabled revival of fortunes in the construction sector and property investment sector. I am afraid there is none visible in the credit supply data:

Unless Russian oligarchs with suitcases of cash are rolling into town, where's the fabled 'pick up of building activity' being funded from? Mars? Or cash piles of our farmers?

Total credit is still shrinking, most critically, in the sectors excluding Financial Intermediation and Property:

Credit in Primary Industries and Manufacturing has flat-lined some 33-39 months ago and is showing no life since, which is sort of suggests that the PMIs (Manufacturing) 'boom' is a signal of skewed PMI metric, capturing more of the MNCs than of domestic activity:

When it comes to the 'brighter' spot of Transport - credit pick up is off extremely weak position:

In short, as credit is linked directly to investment activity, the above suggests continued deep-freeze in the economy through H1 2013. There seem to be no signs of revival so far, albeit caveats to this apply - this is just one indicator and it is an indicator that does not tell us much about new loans issuance as opposed to old loans expirations/maturing etc. Still, to get investment-driven growth, we need credit figures to rise. Not fall...

Any source

1/7/2013: Irish Manufacturing PMI: June 2013

Irish Manufacturing PMI is out today and I can't really report much on the subject - the Investec - Markit continue to put out qualitative analysis in place of what used to be very informative press releases.

The PMI data is seasonally adjusted, which makes y/y comparatives slightly questionable, while normal volatility makes m/m comparatives pretty much meaningless. Note: despite the seasonal adjustment data remains Laplace-distributed. In the past, it was possible to make some educated guesses as to the underlying drivers of the PMI by looking at trends in components. Now - it is impossible.

But ok, let's deal with the headline PMI alone.

The headline PMI reading is not as ugly in June as it was in March and April (PMI average at 48.3), but not pretty either.

We have a statistically insignificant rise in the overall index reading of 0.6 points (bi-directional standard deviation for this data is at 4.37 for full sample, 4.28 since 2000 and 5.21 since 2008).

The increase brings us notionally above 50 to 50.3, for the first time since February 2013, but
1) This is not a reading that is statistically significantly different from 50.0 (STDEV is at 2.19 for difference from 50 and the skew is -1.46, so 0.3 is not significant)
2) Current reading still remains consistent with negative trend set on around 12 months ago. Next 1-2 months will be critical in either confirming the trend or potentially signalling an inflection point. Then again, next 1-2 months will be peak of summer, and will be unlikely to tell us much.
3) 50.3 reading in June is identical to January 2013 and is below 12mo MA of 50.9, and is about identical to the 3mo average through March 2013 at 50.1. 3mo average reading through June is below 3mo averages through June in every year 2010, 2011, 2012.

Core conclusion: output did not, in any normal statistical likelihood, return to growth yet, although PMI reading did come to around 50 from the upside (50.3)… it was also around 50 back in May (49.7) but on the downside.

Per Investec, there was "a further reduction in new orders, although the latest decrease was only fractional, and the slowest in the current four-month period of decline. New export orders, meanwhile, fell at a faster pace than in May." We, of course, have no idea just how far these reductions have taken the two sub-indices, because Investec and Markit are no longer giving us actual sub-index readings.

Charts on dynamics:

Any source