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).

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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.

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28/6/2013: Exports-led recovery: Q1 2013

I covered the headline numbers and trends for the GDP and GNP in previous two posts: here and here. Now, onto some more detailed analysis.

Remember, from the very beginning of the crisis, Irish and Troika leaders have been incessantly talking about the 'exports-led recovery'. Position on this blog concerning this thesis consistently remained that:

1. Exports growth is great, but
2. Exports growth is unlikely to be sufficient to lift the entire economy, and
3. Exports growth projections were unrealistic, while
4. Exports re-orientation toward services, away from goods was less conducive to delivering real growth in the economy.

Q1 2013 data continues to confirm my analysis.

In Q1 2013, based on real valuations (expressed in constant market prices),

• Exports of Goods & Services shrunk 6.47% q/q and fell 4.09% y/y. This compares to +1.19% q/q growth in Q4 2012 and +1.28% expansion y/y. Compared to Q1 2011, when the current coalition took over the reigns in the Leinster House, total exports of goods and services are down 0.88% in real, inflation-adjusted terms. Troika sustainability projections envisioned growth of over 6% over the same period of time.
• Imports of Goods and Services showed pretty much the same dynamics as exports in both Q4 2012 and Q1 2013, but owing to sharper contractions in 2011-2012 these are now down 4.34% compared to Q1 2011.
• Exports of Goods fell in Q1 2013 by 3.83% q/q and 9.37% y/y, while there were declines of 2.68% q/q and 2.33% y/y in Q4 2012.
• Exports of Services were down 8.75% q/q but up 1.27% y/y in Q1 2013, and these were up 4.77% q/q and 4.63% y/y in Q4 2012.

• Trade Balance in Goods and Services fell 4.96% q/q and was down 3.63% y/y in Q1 2013, with Q4 2012 respective changes at -15.91% q/q and +0.98% y/y. Compared to Q1 2011, trade balance is up 15.91%
• Trade Balance in Goods was down 6.63% q/q in Q4 2012 and this deteriorated to -10.73% growth in Q1 2013. Y/y, trade balance in goods contracted 0.05% in Q4 2012 and shrunk 10.59% in Q1 2013. On Q1 2011, trade balance in goods is down 14.04%.
• Trade Balance in Services fell from EUR1,130mln in Q3 2012 to EUR132mln in Q4 2012 before improving to EUR601mln in Q1 2013. In Q1 2012 the balance stood at EUR28 million.

Any source