Tag: Germany

Markit: Chinese Manufacturing Activity Has Contracted in Each Month So Far in 2014

The HSBC Flash China Manufacturing Purchasing Managers’ index (PMI) continued to decelerate, down from 48.5 in February to 48.1 in March. The index has contracted for three consecutive months, with March’s pace being the slowest since July. As noted in the most recent Global Manufacturing Economic Update, these data mirror the easing that we have seen in other indicators, including industrial production, fixed asset investment, and retail sales. As such, they also suggest that real GDP might fall below the 7.7 percent rate seen in the fourth quarter.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released on April 1. The March data reflect decelerating levels of activity for new orders (down from 48.1 to 46.9) and output (down from 49.2 to 47.3). On the positive side, export sales shifted from contraction (49.3) to a slight expansion (51.4), and employment growth declined at a slower rate (up from 46.9 to 49.3).

Hongbin Qu, HSBC’s China Chief Economist and the Co-Head of Asian Economic Research, said, “Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower.”

Meanwhile, Eurozone manufacturers have seen expanding levels of activity for nine straight months, with continued modest growth in March. Nonetheless, the Markit Flash Eurozone Manufacturing PMI edged slightly lower, down from 53.2 in February to 53.0 in March. The underlying data were mixed. Sales growth picked up marginally from 54.1 to 54.4, but production (down from 55.5 to 55.4), exports (down from 54.7 to 53.6), and hiring (down from 50.4 to 50.3) moved slightly lower. Still, growth in output and new orders remained relatively healthy, even with some easing in many of the key figures.

One of the lagging economies in Europe has been France, which had contracting levels of manufacturing activity in all but 2 of the past 27 months. The good news was that French manufacturing sentiment turned positive once again in March, with the Markit Flash France Manufacturing PMI up from 49.7 to 51.9. Activity was up across the board, and growth in new orders (up from 46.6 to 53.3) were at their highest level since June 2011. Elsewhere in Europe, German manufacturing activity slowed a bit, down from 54.8 to 53.8. Despite the deceleration, output (down from 57.6 to 57.0) and sales (down from 57.2 to 55.6) growth remained strong.

Likewise, the Markit Flash U.S. Manufacturing PMI moved lower for the month, down from 57.1 to 55.5. February’s figure reflected the strong rebound from January’s weather-related softness due to severe winter storms. Much like the European data, the larger story is the continued modest growth for manufacturers in the U.S. market. For instance, new orders (down from 58.8 to 58.0) continued to grow strongly even with a little easing for the month, and production (up from 57.2 to 57.5) and exports (up from 50.9 to 51.0) had a slightly faster pace of growth.

Employment growth (down from 54.0 to 53.9) was essentially unchanged for the month despite edging a bit lower for the month. After hiring nearly stalled last June, manufacturers have continued to add to their workforces, albeit at a modest pace.

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

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Markit: Manufacturing Output is the Highest in Two Years, But New Orders Slowed

Markit said that manufacturing activity in February continued to expand, but the pace of new orders slowed somewhat from January. The Flash Manufacturing Purchasing Managers’ Index (PMI) for the United States declined from 55.8 to 55.2, suggesting a marginal change in the overall picture. The good news is that output appears to be recovering strongly, up from 56.8 to 58.1. Five months ago, the output index stood at 51.2, illustrating the improvements seen since then. Moreover, February’s output figure is the highest that it has been since March 2011.

The pace of growth for new orders, employment, and input prices eased a bit. These numbers – particularly sales – helped bring the composite index down for the month, even with higher output. The index for new orders dropped from 57.4 to 56.4. While U.S. sales continued to rise, new export orders contracted once more, reversing two months of modest gains and reflecting continuing weaknesses abroad, especially in Europe (see below). Meanwhile, hiring and raw material prices expanded in February, with each at their slowest pace of the last few months.

Markit Chief Economist Chris Williamson said, “Employment rose in February, but the rate of job creation slowed and remained weaker than policymakers would like to see.” He went on to say: “While the survey … paints an encouraging picture of the manufacturing sector, helping to drive a return to growth for the economy as a whole in the first quarter of this year, firms still need to see greater confidence in the longer-term economic outlook for employment numbers to pick up again.”

This improving – but still cautious – economic outlook in the U.S. stands in contrast to what we continue to see in Europe. The Markit Flash Eurozone Manufacturing PMI was essentially unchanged, down from 47.9 in January to 47.8 in February. While this index has improved from the 44.1 figure observed in August, it continues to reflect a challenging environment for businesses on the continent. The PMI has shown contracting levels since August 2011, or for 19 straight months.

Despite the persistent bad news, the rate of decline for new orders slowed in February in the manufacturing sector. One positive to report was an expansion in new export orders, up from 48.8 to 51.7, the first increase in export sales since June 2011. The Markit report attributed this to increased exports to Asia and the U.S., with strength particularly seen in Germany.

Along those lines, the Flash German Manufacturing PMI shifted from a slight contraction (49.8) to a slight expansion (50.1) for the month. As noted in the Eurozone release, the main driver of the higher index reading was stronger growth in sales, both domestic and foreign. The new orders index rose from 48.5 to 52.7; while the new export orders index increased from 48.2 to 54.6. The jump in sales slowed the decline in employment, at least for February, which was a good sign.

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


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An Austerity Budget? Maybe the Germans are on to Something

From the left-liberal Der Spiegel, ”German Austerity Program Offers Chance for New Beginning“:

As Chancellor Angela Merkel’s embattled government gets ready to thrash out an austerity program to rein in the budget deficit, fears are growing that stringent cuts might choke off growth and anger voters. But after 50 years of near-continuous spending hikes, there is ample scope for radical savings that would not hurt public services and may even boost the economy.

The German government is putting the finishing touches this week on an austerity program that offers a chance of a fresh start, not just for the country’s complex and bloated tax and welfare system, but also for Chancellor Angela Merkel.

Yes, the taxes included are significant:  a higher tobacco tax, and new levies on nuclear fuel rods, airline ticket purchases and financial transactions.

This is telling:

The Americans don’t like the plans. The atmosphere was decidedly frosty at a meeting last week in Berlin between US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schäuble, because the two men fundamentally disagree. Geithner urged the Europeans to spend more and to run up debts to boost economic growth and help the global economy. Schäuble countered that high debts were the root of the turmoil now engulfing the euro zone.

In our experience, Germans are especially leery of deficit-induced inflation, certainly more than Americans. Something about Weimar …

P.S. Well, it IS using biomass for heating.

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