PMI and Japanese Tankan Results Plus a U.S. Government Shutdown

October 1, 2013

The dollar fell to multi-month lows of CHF 0.8992, 1.3589 per euro, and 1.6262 per pound after the U.S. Congress failed to avert a partial shutdown of the federal government that will lay off close to a million workers.  Obama warned of economic consequences.  The dollar is now off its lows and shows net overnight losses of 1.1% against the Australian dollar, 0.6% relative to the yen, 0.3% versus sterling and 0.1% against the euro but no change vis-ai-vis the loonie, Swiss franc or yuan.  The kiwi eased 0.3% against the U.S. dollar.

Share prices are are up 0.7% in India and Indonesia, 0.4% in Singapore and 0.2% in Japan and New Zealand.  In Europe, stocks have climbed 0.8% in Italy, 0.7% in France, and 0.6%  in Spain and Germany.  The British Ftse has eased 0.2%.

The ten-year British gilt, German bund and Japanese JGB yields are respectively up a basis point, unchanged and down a basis point.

Gold and oil prices have edged 0.2% and 0.1% higher.

The Reserve Bank of Australia’s official cash rate was left unchanged at 2.5% as expected.  The stimulus of prior rate cuts is still being felt, according to a statement from the RBA Board, which also expressed a desire to see further A-dollar depreciation but did so with less forcefulness than in past statements.

Australian new home sales rebounded 3.4% in August following a 4.7% slump in July.  A 0.4% rise of Aussie retail sales in August was somewhat greater than forecast.

China will be closed the rest of the week for a national holiday commemorating the Communist revolution in 1949.  But the government-authorized CFLP purchasing managers index was released.  Such printed at 51.1, a tenth point better than in August.  Its a 17-month high but lower than forecast.

The Bank of Japan released a very upbeat quarterly corporate survey.  The so-called Tankan showed the most favorable business conditions since late 2007/early 2008. 

Japanese Prime Minister Abe confirmed a decision to go ahead with a 3-percentage point sales tax hike to 8% in April 2014.  Any adverse economic effect will be blunted by a concurrent stimulus fiscal package of roughly 5 trillion yen.

Real household spending in Japan sank 1.9% between August 2012 and August 2013.  The on-year drop was as large as any in the past 19 months, and such embodied a 0.9% decline from the prior month.

Japan’s unemployment rate increased 0.3 percentage points to a 6-month high of 4.1% in August.  The job offers ratio edged higher to 0.95 from 0.94, however, and employment was 0.5% greater than in August 2012.  Japanese labor cash earnings in August were 0.6% lower than a year before, but motor vehicle sales in September (+12.4%) posted their first on-year advance in five months.

A slew of September manufacturing purchasing manager surveys were reported.

  • Euroland’s 51.1 score matched the flash estimate but was down from 51.4 in August, thus a two-month low.  The readings for Germany (51.1), Austria (51.1), Italy (50.8), Spain (50.7), and Greece of 47.5 were also two-month lows.  The 55.8 Dutch score constituted a 29-month high.  The Irish reading of 52.7 was at a 14-month high, and France’s 49.8 score represents a 19-month high.  Price pressure increased slightly.
  • Britain’s manufacturing PMI of 56.7, a two-month low but nonetheless signaling strength, was down from a 30-month high of 57.1 in August.
  • Australia’s manufacturing index jumped 5.3 points to 51.7.
  • Sweden’s PMI improved 3.8 points to 56.0.  Scores above 50 imply expanding activity.
  • The Swiss PMI of 55.3 was a 2-month high and above analyst forecasts.
  • Norway’s 52.3 surpassed expectations but represented a 2-month low after 53.0 in August.
  • In Eastern Europe, the Czech PMI slipped to a 2-month low of 53.4 from 53.9 the month before, but the 3Q score was the best quarter in two years.  Poland’s 53.1 after 52.6 in August showed the fastest rate of expansion since April 2011. Hungary’s PMI printed at 54.5, up from 51.8 and a 6-month high.  Russia’s PMI stayed at 49.4, the third sub-50 result in a row.
  • The Vietnamese reading of 52.0 was the best score since April 2011.  Export demand strengthened, but domestic demand is lackluster.
  • Taiwan’s 52.0 reading marked an 18-month high.
  • Indonesia recorded a 50.2 reading, a two-month high after a sub-50 score of 48.5 in August.
  • India shot a 49.6, up from 48.5 in August still below the 50 no-change threshold.
  • Turkey’s PMI jumped 3.1 points to 54.0, an 8-month high.
  • The South African PMI slumped to 49.1 in September from 56.5 in August.  The level was the weakest since March.

Unemployment in the euro area stayed at a downward-revised 12.0% in August.  A year earlier such was 11.5%.  The youth jobless rate is now 23.7%.

German labor statistics proved well south of expectations.  Unemployment leaped 25K versus a forecast drop of 5K and represented a higher 6.9% of the labor force.  Jobs grew 0.5% on year in July-August, down from 0.6% in the first half of 2013.

Italian unemployment of 12.2% in August was a record high.

South Korean consumer price inflation slowed to 0.8% in September from 1.3% in August.  A smaller-than-forecast $3.7 billion South Korean trade surplus in September was also announced.  Thailand reported on-year increases of 1.4% in consumer prices and 0.6% in producer prices for September.  Indonesian CPI inflation subsided to a still-unacceptable 8.4% in September from 8.8% in August. 

Scheduled U.S. data today include the manufacturing PMI, motor vehicle sales, construction spending and weekly chain store sales.  Note that because of the government shutdown, scheduled release times for data, including Friday’s Labor Department labor force survey, could be moved upward.

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

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