Better-than-Expected PMI Scores in Most Cases

February 1, 2012

Investors started February in a good mood, bidding up stocks and commodities.  The catalysts for this guarded optimism were

  • Most manufacturing purchasing manager indices suggested that European recessionary forces may be lessening.
  • Rumors of further progress in hammering out a bailout deal for Greece.
  • Lessening pressure on Portuguese sovereign debt.
  • Some upside surprises in other PMI reports.

The German Dax, Paris Cac, and British Ftse so far have advanced 1.9%, 1.6%, and 1.3% today.  Earlier today, stocks rose 0.7% in Vietnam and The Philippines, 0.6% in India and Indonesia, and 0.5% in Malaysia and Pakistan.  But Japan’s Nikkei edged only 0.1% highr, and stocks fell by 1.4% in China and 0.9% in Australia.

The dollar fell by 0.5% against the New Zealand and Australian dolllars, 0.4% versus the euro, 0.3% relative to the Swiss franc and Canadian dollar, and 0.2% against the yen and sterling.  The yuan remained steady.

Oil and gold prices increased 0.8% and 0.5% to $99.30 per barrel and $1748.90 per ounce.

Ten-year British gilt and German bund yields rose by four and three basis points, whereas the 10-year Japanese JGB edged one basis point lower.

Euroland’s manufacturing purchasing managers index printed at 48.8 in January, up 0.1 points from the preliminary indication, 1.9 points above the December reading, and the best result since August.  Being less than 50.0, however, this report still indicates that activity was contracting, albeit more modestly than before.  The Austrian index of 51.8 was at a 7-month high.  Germany’s 51.0 was a 6-month high.  The Dutch (49.0) and Spanish (45.1) indices constituted 5-month highs, and the Irish (48.3) and Italian (46.8) scores were the best in four months. The French index of 48.5 and Greece’s measure of 41.0 were at two-month lows.  In the whole euro area, orders still printed below 50, and input prices climbed for the first time in four months.  The intensity of recession in peripheral nations may be easing.

The British factory purchasing managers index rose 2.4 points to an eight-month high of 52.1.  Activity expanded for the first time since September when the reading was 50.8.  New orders were expanding for the first time since April.

In eastern Europe, Hungary’s PMI improved 1.2 points to 49.8.  Poland’s index posted its third largest month-to-month improvement ever, rising 3.4 points to 52.2.  The Czech index, however, slid 0.4 points to 48.8 as both orders and jobs contracted.  Russian manufacturing continues to sputter.  The PMI there printed at 50.8, lowest since October and down from 51.6 in December.

One notably disappointing PMI report came from Switzerland where the pace of contraction in manufacturing picked up noticeably.  The Swiss PMI fell to 47.3 from 49.1 in December, which had been reported initially as 50.7.

In Scandinavia, the Norwegian PMI leaped 8.3 points to 54.9, the highest score since August.  The Swedish PMI scored a 51.4, two points better than forecast and up from 48.9 in December.  Denmark’s index fell 5.1 points to 54.3. 

India’s PMI rose 3.3 points to a robust score of 57.5, best since last May.

There are two separate Chinese purchasing manager surveys.  The government’s official index, the CFLP, edged up 0.2 points to a four-month high of 50.5, while the HSBC index ticked just 0.1 higher and remained below 50 with a reading of 48.8. 

Taiwan posted a sub-50 PMI for an eighth consecutive time, although the 48.9 reading was better than December’s 47.1 and all earlier scores since July.  The South Korean PMI climbed 2.8 points to 49.2 and exhibited slower declines in both production and new demand.

Turkey’s PMI slid 0.3 points to 51.7, and inflation components receded for the first time since October.  South Africa’s PMI swung from a sub-50 reading in December of 49.4 to a score of 53.2 in January.

Australia’s PMI reflected a somewhat better pace of expansion.  The reading for January of 51.6 was 0.6 points higher than for December.  July through November had seen the PMI score below 50, thus connoting contraction, but manufacturing has responded favorably to two easings of the Reserve Bank’s Official Cash Rate.

With a heavy negative advertising blitz and more forceful debate performances, Mitt Romney as expected won the Florida primary election very handily, taking more than twice as many votes as Newt Gingrich.  No new Republicans have dropped out of the race, however.

Home prices in Australia sank 1.0% last quarter and posted a deeper on-year decline of 4.8%.  Such had dropped 2.2% in the year to 3Q11 and risen 5.8% in the year to 4Q10.  In SDR terms, Australian commodity prices were 6.0% higher than a year earlier in January, down from a 9.6% on-year rise in December.

Japanese wage earnings dipped 0.2% from a year earlier in both December and full-2011.  The calendar year decline was the first in two years.  Japanese auto sales were 40.7% greater in January than a year earlier.  They had risen 23.5% between December 2010 and December 2011.

Consumer price inflation in South Korea slowed to 3.4% in January from 4.2% in December.  Core inflation picked up in contrast, printing at 3.2%.  South Korea’s trade balance dipped into the red last month.  Indonesian CPI inflation eased in January to 3.7% from 3.8%.  Thai PPI inflation slowed to 3.0% from 4.5% in December, and Thai CPI inflation also declined, falling to 3.4% from 3.6%.  Hong Kong GDP rose 0.3% last quarter.  On-year growth of 3.0% was less than the 4.3% pace in 3Q11 or the full-2011 advance of 5.0% in the former British colony.

Britain’s Nationwide house price index slid 0.2% last month and posted a smaller-than-expected on-year decline of 0.6% after falling by 1.0% in the year to December.

The preliminary consumer price inflation reading for the euro area in January was 2.7%, same as December’s pace but down from 3.0% in November.

Norwegian unemployment remained at 3.4% in October-December.  Ireland’s jobless rate dipped a tenth percentage point to 14.2% last month.  Danish retail sales in December were 1.2% lower than a year earlier.

Switzerland had more bad economic news to report in addition to the aforementioned PMI survey.  Swiss retail sales sank 2.9% in December, cutting its on-year rate of increase in third to just 0.6%.  Swiss National Bank officials can be expected to intervene heavily to enforce the franc’s 1.20 per euro ceiling, but will that be enough?

Several U.S. economic indicators are being released today: the ADP private employment estimate, motor vehicle sales, construction spending, and the ISM purchasing managers survey in manufacturing.  Plosser of the Philly Fed speaks publicly.  Canada’s PMI also gets reported.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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