European PMIs Surpass Expectations But Ukraine Risks Still in Play

March 5, 2014

Russian President Putin has not stood down even though his orchestrated turmoil in neighboring Ukraine has hammered sentiment toward the Russian economy, exposing such to a possible slide into recession.

The euro area’s service-sector and composite purchasing managers indices for February were revised higher, and the British result exceeded forecasts.

Australia scored a much higher-than-projected services-PMI, while 4Q Aussie national income accounts revealed the strongest GDP growth since 1Q13.

On the central bank watching front, the Bank of Canada has a scheduled interest rate policy announcement at 15:00 GMT.  A Polish decision is likewise due, and the Federal Reserve Beige Book of regional conditions will be published at 17:00 GMT.  On this day before the ECB Governing Council meeting, market talk continues to swirl about the the euro area, like Japan some 15-20 years ago, seems to be slip-sliding toward deflation unbeknownst to clueless monetary officials.

The preliminary flash Ezone GDP estimate was confirmed, showing economic growth last quarter of 0.3% from 3Q and 0.5% from the final quarter of 2012.  Retail sales in January grew twice as fast as assumed.

The dollar lost 0.2-0.3% overnight against the Aussie, Canadian and New Zealand dollars as well as sterling and the yuan, but the U.S. currency has risen 0.2% versus the yen and 0.1% against the euro.  The Swiss franc is unchanged.

Share prices rose 1.3% in Indonesia, 1.2% in Japan, 0.9% in South Korea, Australia and Taiwan, 0.8% in New Zealand, and 0.4% in Singapore, but the Chinese and Hong Kong markets closed lower.  In Europe, equities are down by 0.6% in Britain and 0.4% in France and Germany.  The Swiss and Italian markets are 0.2% firmer, and Spain’s IBEX has edged up 0.1%.

The ten-year British gilt yield rose by two basis points, whereas 10-year Japanese JGBs and German bunds are unchanged.

Oil fell 0.4% to $102.96 per barrel.  Gold is off 0.1% at $1,335.80 per ounce.

Many more purchasing managers survey results from February were reported:

  • Euroland’s composite PMI was revised up 0.6 points to a 32-month high of 53.3.  Germany’s reading of 56.4 was a 33-month high and also revised upward from its flash score.  Although revised up, the French reading of 47.9 was at a 2-month low.  Italy scored a 53.4, which is a 34-month peak, but the Irish and Spanish readings of 55.0 and 53.4 were the lowest in eight and three months.  The data suggest a 0.4-0.5% rise in GDP this quarter, up from 0.3%.
  • Euroland’s services PMI was a 32-month high of 52.6, up from a flash 51.7 score and January’s 51.6 result. 
  • The British services PMI printed at 58.2, slightly under January’s 58.3.  Although an 8-month low, the level points to first-quarter GDP expansion of about 0.7%, not annualized.
  • Russian PMIs of 50.2 on the composite index and 50.8 on services were better than January levels but nonetheless indicate no more than marginal growth just before Putin’s highly risky gamble with the economy.
  • India scored 8-month highs of 48.8 on its services PMI and 50.3 on the composite index.  The latter had been below the 50 no growth threshold in the six previous months.
  • China’s composite PMI reported by HSBC Bank dipped under 50 to a reading of 49.8.  This index in November had touched an 8-month high of 52.3.  The data especially highlight a deteriorating labor market.  The Chinese services PMI was 51.0, a 3-month high.
  • Japan’s composite PMI sunk to a six-month low of 52.0, hurt by unseasonably harsh winter weather.  The services PMI fell below 50 for the first time since September 2012, printing at 49.3.
  • Australia’s services PMI jumped 5.9 points, catapulting above 50 for the first time since March 2013 all the way to a score of 55.2.
  • Hong Kong’s private-sector PMI rose to a 35-month high of 53.3.
  • Lebanon’s private-sector PMI bounced above January’s record low of 44.7 but remained significantly shy of 50 with a reading of 45.5.
  • The South African PMI hit a 3-month high of 51.5 after 50.3 in January and 50.5 in December.
  • Sweden’s services purchasing managers index improved to a robust 56.8 in February from 55.9 in January but was less than December’s 57.7 reading.

Retail sales in the euro area advanced by 1.6% in January, more than reversing December’s 1.3% drop.  January sales volume was 1.3% greater than a year earlier and 1.0% above the 4Q13 average level.  Sales had fallen 0.5% (2.2% annualized) between 3Q13 and 4Q13.

Revised Ezone GDP showed contributions to the 0.3% growth rate of 0.1 percentage points (ppts) from private consumption, 0.4 ppts from net exports, and 0.2 ppts from business investment, mitigated by drags of 0.3 ppts from inventories and 0.1 ppt from government spending.  On-year growth of 0.5% was buoyed by a 0.4 ppt boost from net exports, 0.2 ppts from personal consumption and 0.1 ppt from government spending.  Investment was neutral, and inventories subtracted 0.2 ppts from the GDP growth rate.

Australian real GDP advanced 0.8% last quarter, most since 1Q13 and by 2.8% from a year earlier.

British shop prices slumped by 1.4% in February, their largest on-year drop since 2006.  Food inflation declined by 0.4 percentage points to 1.1%, while other shop prices were 3.0% lower than in February 2013.

Filipino consumer prices edged up 0.1% last month, less than assumed, but were 4.1% higher than a year earlier.  The PPI was 0.1% higher in January than a year before.  Taiwanese CPI and WPI inflation printed in February at negative rates of 0.1% and 0.5%, respectively.

Swedish industrial production fell 0.3% in January and recorded an on-year increase of just 0.8%.

Chinese officials retained a growth target this year of 7.5% but indicated that even 7.0% would suffice.

U.S. private-sector jobs according to the ADP estimate went up by 139K last month following a revised 139K increase in January that was associated with the Labor Department’s subsequent estimate that private sector job creation totaled 142K and that total non-farm jobs increased just 113K.

The U.S. services PMI is also due today, along with the ISM non-manufacturing PMI.  And as mentioned above, the Fed Beige Book arrives.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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