Japanese Tankan and Many Manufacturing Reports

April 1, 2015

The Bank of Japan’s March Tankan survey of business conditions and expectations was mediocre and not consistent with the pace of growth officials want.

The eurozone purchasing managers index climbed to a 10-month high in March and reflected lessening deflation and improved export orders and jobs growth.

China’s government compiled PMI in manufacturing rose 0.4 points to 50.1 in March after back-to-back sub-50 readings in the first two months of 2015.  The services PMI rose 0.3 points to 53.7.  The HSBC estimate for China’s manufacturing PMI was at 49.6, a 2-month low.

The dollar rose overnight by 0.8% against the kiwi, 0.4% versus sterling, 0.3% vis-a-vis the Aussie dollar and 0.1% relative to the yen and loonie.  The dollar is unchanged against the euro and yuan but has lost 0.3% versus the Swiss franc.

The Japanese Nikkei closed down 0.9%.  Share prices also fell 0.9% in Indonesia, 0.8% in Taiwan, 0.6% in South Korea and 0.5% in Australia but rose 1.8% in China and 0.7% in Hong Kong.  In Europe, equities have risen 1.2% in France, 1.1% in Italy, 0.9% in Germany, 0.8% in the U.K., 0.6% in Spain, and 0.5% in Switzerland but are down 0.4% in Greece.

West Texas Intermediate oil has lost another 0.7% to $47.25 per barrel.  Comex gold is unchanged at $1,183 per ounce.

The 10-year German bund climbed two basis points, while the 10-year Japanese JGB slipped by two basis points.

The three most prominent findings in the latest quarterly survey of Japanese companies are 1) weak business spending plans for the new fiscal year, 2) an expected deterioration of business conditions between now and June, and 3) a lack of significantly improved conditions since end-2014.

Euroland’s purchasing managers index for manufacturing printed at a 10-month high of 52.2 in March, 0.3 points better than the flash estimate and 1.2 points higher than in February.  The German (52.8) and Italian (53.3) indices constituted the fastest growth since April 2014.  The Spanish and Dutch PMIs of 54.3 and 52.5 were at two-month highs, and Ireland’s 56.8 led all members of the euro area but was at a two-month low following February’s 182-month high of 57.5.  The Greek, French, and Austrian PMIs were each below the 50 no-change mark at 48.9, 48.8 and 47.7, respectively.  The Greek and French results were at 3- and 2- month highs, while Austria’s index constituted a 4-month low.

Japan’s manufacturing PMI fell 1.3 points to an 11-month low of 50.3 in March.  Although all Japanese firms collectively plan to cut investment spending by 5.0% this fiscal year, large manufacturers intend to increase spending by 5.0%.  Japanese motor vehicle sales rose 49.6% between March 2014 and March 2015.

South Korea reported some disappointing data including the largest month-on-month decline in exports in two years for last month, but the trade surplus widened 9% to $8.4 billion.  South Korea’s manufacturing PMI fell 1.9 points to a 4-month low of 49.2 after back-to-back readings in January and February that were above 50.  South Korean consumer prices remained unchanged on month in March, and the 12-month rate of rate edged lower to 0.4%. 

In other purchasing manager surveys reported today,

  • The Vietnamese manufacturing index fell a point to 50.7.  It was the 19th straight reading above 50, however.
  • Taiwan’s 51.0 index level was the lowest since a 16-month trough in December.
  • Indonesia’s 46.4, a 4+ year low, deepened the picture of slowing emerging market growth in Asia.
  • The Australian manufacturing PMI rose to a 2-month high but, at 46.3, still signified pretty strong contraction.
  • The Russian manufacturing PMI of 48.1 was down from 49.7 in February but not as weak as January’s 47.6 score.
  • Turkey’s reading of 48.0 represents a 71-month low.
  • Poland’s 54.8 was the lowest since December but still implies pretty solid expansion.  Like many other PMI reports from Asia and Europe, input price deflation subsided noticeably last month, helped by the dollar’s appreciation.
  • The Czech PMI of 56.1 matched a six-month high posted in January.
  • The Swedish factory PMI improved to a two-month high of 54.1 from 53.3 in the prior month.
  • The Swiss PMI also touch a 2-month high but at 47.9 still shows a big headwind that resulted when Swiss central bank officials removed the ceiling on the franc’s euro cross rate.
  • The British manufacturing PMI climbed another 0.4 points to an 8-month high of 54.4 in March from 54.0 in February, 53.1 in January, and 52.7 in December.  The sector is rallying at just the right time to help the incumbent Tories in elections set for May 7.
  • Hungary’s PMI climbed further to a solid reading of 55.6 from 55.0 in February, 54.2 in January and 50.9 in December.
  • Norway’s PMI slumped 2.4 points to 48.8 and was well below street forecasts.  As an oil exporter, Norway’s economy has been hurt by plunging energy prices.
  • South Africa’s PMI rose 0.3 points but remained will below the 50 no-change line at 47.9.

Australian building permits were 14.3% higher than their year-earlier level in February.  They beat expectations and give another reason why the central bank is likely to hold off on another interest rate cut.

Indonesian CPI inflation edged higher to 6.4% last month and was associated with an unchanged core inflation rate of 5.0%.

U.S. mortgage applications rose 4.6% last week, and the 30-year mortgage rate dipped a basis point to 3.89%.

The ADP estimate of private sector U.S. jobs growth in March was 189K, a bit over 30K less than market expectations and ending a string of strong reports.  February 2014 was the last month in which the Labor Department’s report of total nonfarm employment growth came in below 200K.  The U.S. also releases construction spending, and the ISM manufacturing PMI from the Institute of Supply Management gets released.  Williams and Lockhart of the Federal Reserve speak publicly today.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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