Tag: eurozone

January Chinese and Eurozone PMI Figures Move Higher, But Global Softness Remains

Even as the global economy remains soft, there were some signs of stabilization in Asia and Europe, according to the most recent purchasing managers’ index (PMI) data. The Markit Flash Eurozone Manufacturing PMI increased from 50.6 in December to 51.0 in January. This was the highest level since July. The pace of growth for new orders (up from 50.2 to 50.4), output (up from 50.9 to 52.2) and employment (up from 50.6 to 50.9) each picked up somewhat. At the same time, exports (down from 51.6 to 50.7) eased slightly but continued to expand. (continue reading…)

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Global Manufacturing Economic Update – January 9, 2015

Here is the summary for this month’s Global Manufacturing Economic Update: 

The minutes of the Federal Open Market Committee’s December 16–17 meeting continue to reflect increased optimism about the U.S. economy, with relative strength in both output and labor markets. Federal Reserve participants expect U.S. real GDP growth of 2.6 to 3.0 percent in 2015, with the unemployment rate falling to 5.2 to 5.3 percent and core inflation remaining below its stated goal of 2.0 percent. At the same time, they expressed worries that global economic challenges might dampen growth here. Specifically, the minutes say the following on this topic:

Many participants regarded the international situation as an important source of downside risks to domestic real activity and employment, particularly if declines in oil prices and the persistence of weak economic growth abroad had a substantial negative effect on global financial markets or if foreign policy responses were insufficient. (continue reading…)

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Monday Economic Report – January 5, 2015

Here is the summary for this week’s Monday Economic Report: 

Growth in manufacturing activity slowed somewhat in December, according to the Institute for Supply Management (ISM). The headline purchasing managers’ index (PMI) dropped from 58.7 in November to 55.5 in December, its lowest level in six months. Slower global growth, reduced commodity prices and the West Coast ports slowdown were cited in the ISM report as reasons for the decline. While this report was disappointing, it is notable that the lower figure followed several months of very healthy expansions in both new orders and production, and manufacturers were more upbeat at year’s end than earlier in the year. The manufacturing PMI data averaged 57.7 in the second half of 2014, an improvement from the 54.0 average observed in the first half. (continue reading…)

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Monday Economic Report – December 22, 2014

Here is the summary of this week’s Monday Economic Report: 

Manufacturing production was up sharply in November, with output increasing 1.1 percent for the month and 4.8 percent year-over-year. These healthy gains followed a softer-than-desired autumn, and we hope it suggests that production figures will begin to match the relative optimism regarding expected demand and output seen in a number of sentiment surveys, including the latest NAM/IndustryWeek Survey of Manufacturers. Capacity utilization for the sector was also higher, up from 77.6 percent in October to 78.4 percent in November. This was the highest utilization rate since December 2007, the first month of the Great Recession. Moreover, total industrial production rose 1.3 percent, with utility output in November also up significantly. Mining production was down for the month, but up a whopping 9.3 percent over the past 12 months, with the sector benefiting from increased energy exploration. (continue reading…)

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Markit: Chinese Manufacturing Activity Contracted for the First Time Since May

The Chinese economy continues to slow, with the HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) contracting for the first time since May. The headline index declined from 50.0 in November to 49.5 in December. New orders (down from 51.3 to 49.6), output (up from 49.6 to 49.7) and employment (up from 48.7 to 48.9) were below 50 – the threshold signifying reduced activity – in December, with production declining for the second straight month. On the positive side, new export orders (up from 51.1 to 51.7) were still growing somewhat modestly. As such, this report suggests that the Chinese economy is ending 2014 much as it began it, with softness in the manufacturing sector. (continue reading…)

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Monday Economic Report – November 24, 2014

Here is the summary for this week’s Monday Economic Report:

Central banks around the world have acted recently in an attempt to lift a sagging global economy. On Friday, for instance, the European Central Bank (ECB) announced that it has begun purchasing asset-backed securities, finally beginning a quantitative easing program that some have long sought. Earlier in the day, ECB President Mario Draghi said that “we will do what we must” to spur economic growth. In addition, the People’s Bank of China surprised markets by cutting interest rates on Friday. These actions followed the Bank of Japan’s announcement on October 31 that it would increase the amount of its monthly asset purchases. (continue reading…)

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Markit: Chinese and European Economies Stalled in November

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) fell to neutral (50) in November, down from 50.4 in October. This was the weakest reading since Chinese respondents noted contracting levels of activity from January through May. Indeed, output contracted once again (down from 50.7 to 49.5) for the first time since May, which was not a good sign. Hiring (down from 48.9 to 48.4) was also negative for the 13th straight month. On the positive side, new orders (up from 51.2 to 51.4) edged slightly higher, and exports (down from 51.7 to 50.5) continued to expand, albeit at a much slower pace. (continue reading…)

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Monday Economic Report – October 27, 2014

Here is the summary for this week’s Monday Economic Report:

What a difference a week makes. After a volatile week in financial markets amid worldwide economic worries, things calmed down last week. While the Dow Jones Industrial Average remains 2.7 percent below its all-time high on September 19, it gained 425 points last week, or 2.6percent. Attitudes shifted to a more positive stance on decent earnings reports and on news that firms remain mostly upbeat in their outlook. (continue reading…)

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Somewhat Better Manufacturing Data in China and Europe for October, But Weaknesses Persist

The HSBC Flash China PMI rose to its highest level in three months, up from 50.2 in September to 50.4 in October. It was the fifth consecutive monthly expansion in manufacturing activity in China, an improvement from the contracting activity levels experienced in the first five months of 2014. Yet, despite the better headline figure, many of the underlying data points reflect some easing in growth rates for the month, including new orders (down from 51.5 to 51.4), exports (down from 54.5 to 52.8) and output (down from 51.3 to 50.7). Hiring continued to decline but at a slower rate (up from 47.5 to 48.6).

As such, Chinese manufacturers are expanding but not by as much as we might prefer. This finding is consistent with the deceleration in other Chinese data, including real GDP, which slowed from 7.5 percent year-over-year growth in the second quarter to 7.3 percent in the third quarter. Fixed real investment (down from 16.5 percent year-over-year in August to 16.1 percent in September) and retail sales (down from 11.9 percent year-over-year to 11.6 percent) also declined. On the positive side, industrial production picked up, increasing from the year-over-year rate of 6.9 percent in August to 8.0 percent in September; yet, that remained lower than July’s 9.0 percent pace.

Meanwhile, the Markit Flash Eurozone Manufacturing PMI increased from 50.3 to 50.7. That is good news, as the September figure had been the lowest level since July 2013, when Europe first emerged from its recession. October’s reading was higher largely due to a pickup in output (up from 51.0 to 51.9) and employment (up from 50.1 to 50.6). Still, new orders (unchanged at 49.3) contracted for the second straight month, with exports (down from 51.6 to 50.5) easing. The Eurozone continues to face challenges in manufacturing, especially in terms of falling sales. The results also vary by country, with Germany (up from 49.9 to 51.8) improving somewhat, while French manufacturers  (down 48.4 to 47.6) continue to report weakness.

Closer to home, the Markit Flash U.S. Manufacturing PMI dropped slightly, down from 57.5 to 56.2. The pace of activity was down across-the-board, including new orders (down from 59.8 to 57.1), output (down from 59.6 to 58.0), hiring (down from 56.4 to 56.2) and exports (down from 54.1 to 51.9). While the index for new orders was at its lowest level since January’s 53.9 reading, it is hard to get too worked up over October’s decline for these indicators. After all, demand, production and employment continue to grow at decent rates, and manufacturers are reporting higher activity levels than earlier in the year.

Still, we would like to see better results to begin the fourth quarter, particularly for exports. Given the softness in worldwide markets, however, this weakness should not be a surprise.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Monday Economic Report – October 20, 2014

Here is the summary for this week’s Monday Economic Report:

Global financial markets were highly volatile last week, with investors concerned about slower growth in Europe and an Ebola outbreak in the United States, among other factors. Indeed, industrial production in the Eurozone fell 1.8 percent in August, and activity was down largely across-the-board, most notably in Germany (down 4.3 percent), the Eurozone’s largest economy. Sluggish income and labor market growth in Europe has also pushed inflationary pressures lower, with year-over-year pricing changes of just 0.3 percent in September. Despite such worries, equity markets began to rebound on Friday, with the Dow Jones Industrial Average (DJIA) closing at 16380.41. Nonetheless, the DJIA remains 5.2 percent below its all-time high of 17279.74 on September 19.

Still, the U.S. economy has shown signs of resilience. Despite a softer August, manufacturing production increased 0.5 percent in September. Over the past 12 months, output in the sector has risen 3.7 percent. While this was slower than its July year-over-year pace, it reflects a nice improvement from the more sluggish 1.5 percent rate in January.

Moreover, surveys from the Manufacturers Alliance for Productivity and Innovation (MAPI) and the New York and Philadelphia Federal Reserve Banks observed expanding activity levels in their latest reports. Each measure eased somewhat in October, but they were expansionary nonetheless. The weakest of these reports was the Empire State Manufacturing Survey, which observed a slight contraction in new orders. Yet, even there, respondents remained mostly optimistic about demand and output over the next six months. Along those lines, MAPI has a generally upbeat outlook, predicting that manufacturing production will increase by 3.4 percent in 2014 and 4.0 percent in 2015.

Housing starts exceeded 1 million again, increasing from an annualized 957,000 units in August to 1,017,000 in September. This continues a slow-but-steady trend upward, with an average of 978,111 so far in 2014 relative to an average of 930,000 for all of 2013. Still, there was relatively weak housing activity throughout much of the second half of last year and the first half of this year, and the latest data suggest that the sector has begun to stabilize somewhat. I continue to predict housing starts solidly in the 1.1 million unit range by the beginning of 2015. Homebuilder confidence has also reflected a positive outlook despite slipping a bit in October. Lower mortgage rates might spur more residential construction activity. According to Freddie Mac, average 30-year fixed mortgage rates fell to 3.97 percent this past week, their lowest level since June 2013.

Meanwhile, there was mixed news on the consumer front. On the positive side, consumer confidence reached a pre-recessionary high, according to the University of Michigan and Thomson Reuters. This is a sign that improvements in the economy and lower gasoline prices have helped to lift Americans’ spirits. Yet, there are also lingering worries about income and labor market growth, and consumers remain somewhat cautious overall. Retail spending declined 0.3 percent in September, suggesting softness as we begin autumn. At the same time, year-over-year growth in retail sales was up 4.3 percent, a fairly decent rate, and the holiday season retail outlook looks pretty strong. We hope we will see better consumer spending data in the coming months.

This week, we will get additional insights regarding the health of the global economy. Markit will release Flash Purchasing Managers’ Index (PMI) data for China, Japan, the Eurozone and the United States. The European data are expected to show continued weakness, but we will be watching for signs of progress in the Chinese manufacturing sector, which has decelerated in recent months. The Kansas City Federal Reserve Bank will also unveil its latest manufacturing survey, and it is expected to show continued expansion in its district. Beyond these surveys, we will learn about growth in consumer prices, and if they are similar to the producer price index data released last week, they will reflect easing in both food and energy costs. Other highlights this week include reports on existing and new home sales, leading indicators and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. 

DJIA - oct2014

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