Chinese and Ezone Flash PMI Surveys Highlight Weakness

April 23, 2013

HSBC reported a 1.1 decline in China’s manufacturing purchasing managers index.  At 50.5 in April, the second quarter began with just marginal growth and reversed an encouraging improvement in March.

Preliminary readings on the German, French and Ezone composite, manufacturing and service-sector PMI surveys also were released overnight, and they suggest that the region’s downturn more likely intensified than lessened this quarter.  The only hopeful sign was an easing of inflation, which leaves the ECB with greater flexibility to cut interest rates and undertake other forms of stimulus.

  • Euroland’s manufacturing purchasing managers index fell 1.3 points to a 4-month low of 46.5.  The service sector PMI edged up only 0.2 points to a 2-month high of 46.6, and the composite index of 46.5 was unchanged from the reading in March but down from 48.6 in January.
  • The German economic downturn had stopped briefly but has now renewed regrettably.  The composite German PMI score fell 1.8 points to a sub-50 reading of 48.8, a six-month low.  The service sector PMI (49.2 after 50.9 in March) also constitutes a six-month low, while the manufacturing PMI dropped 1.1 points to a 4-month low of 47.9.
  • The French PMI’s point to a slower yet still-significant rate of economic contraction in the region’s second largest economy.  France’s composite PMI printed at 44.2 after readings of 43.1 in February and 41.9 in March.  Both the manufacturing PMI (44.4) and service-sector PMI (44.1) were at 4-month highs yet below 45.0.  Readings of 50 delineate the threshold between an economy that is contracting and one that is expanding.

The euro fell in response to the PMI data, hitting lows of $1.2973 and JPY 127.93. 

The dollar fell 0.6% against the yen but shows overnight net gains of 0.7% relative to the Swiss franc, 0.6% against the euro, 0.4% versus sterling, 0.3% against the Australian dollar, and 0.2% versus both the loonie and kiwi.  The yuan is unchanged.

The Chinese PMI disappointment weighed on commodity prices.  Gold weakened 0.6% to $1412.40 per ounce, while oil is 1.0% softer at $88.27 per barrel.

Ten-year sovereign bond yields are down two basis points in Japan and Britain and by a single basis point in Germany.

Share prices fell in Asia but are higher in Europe.  Stocks lost 3.2% in China, 1.9% in the Philippines, 1.1% in Hong Kong, 0.7% in Singapore, 0.4% in Malaysia, Indonesia, Taiwan and South Korea, and 0.3% in Japan.  The Paris Cac and Spanish Ibex have risen 1.5% and 1.4%.  Stocks gained 0.9% in Milan, 0.8% in London and 0.5% in Frankfurt.  Equities also rose by 1.0% in Australia and 0.7% in New Zealand.

Japanese small business sentiment retreated 0.3 points to 49.4 in April after jumping 3.7 points in March according to the Shoko Chukin index.

The Conference Board reported a 0.3% increase of Australia’s index of leading economic indicators to an 8-month high.  The index of coincident indicators rose 0.5% in February.  In South Africa, the index of leading economic indicators increased 0.8% in February.

CPI inflation in Singapore settled back to 3.5% last month from 4.9% in February. Taiwan posted a smaller 3.28% on-year drop in industrial production last month after an 11.6% plunge between February 2012 (a leap year month) and February 2013.

Consumer confidence in Italy unexpectedly improved in April, printing a full point higher at 86.3.

Spanish house prices registered a smaller 0.8% decline last quarter than in 4Q12 when such dropped by 2.2%.

French business sentiment unexpectedly worsened three points to a 3-month low of 88 in April from an upwardly revised 91.

Dutch consumer spending fell by another 2.3% in February, similar to the fall in January.

Britain’s public-sector net borrowing last month of GBP 16.747 billion exceeded expectations.  So did the public-sector net cash requirement of GBP 31.27 billion.  The Confederation of British Industries (CBI) released results of the April survey of industrial trends, showing an unexpected 10-point deterioration to a reading of negative 25, which was the weakest score since October 2010.  Analysts anticipated a 2-point improvement.

Icelandic wage costs rose 1.3% on month and accelerated to a 12-month increase of 5.5% in March from 5.2% in February.

The Swiss trade surplus narrowed slightly to CHF 1.9 billion last month from CHF 2.0 billion in February, as both exports and imports advanced.

Unemployment in Finland rose to 9.0% in March from 8.5% a year before.  Polish unemployment of 14.3% was 0.1 of a percentage point lower in March than in February.  Sweden’s jobless rate of 8.8% in March compares to 8.0% a year earlier, but the seasonally adjusted 8.4% was down from 8.5% in February.  Polish retail sales rebounded less sharply than expected, printing 0.1% higher on year last month after a 0.8% drop in February from a year earlier.

U.S. releases today include the Richmond Fed manufacturing index, the FHFA house price index, new home sales, and weekly chain store sales.  Canada releases retail sales, and Hungary’s central bank is widely expected to cut its interest rate yet again.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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