Polarizing Purchasing Manager Trends

December 3, 2014

The November U.S. purchasing managers index jumped by a greater-than-forecast 2.2 points to 59.3, implying very robust non-manufacturing activity.  Sales leaped 4.4 points, while new business advanced by 2.3 points.

Britain’s services PMI rebounded 2.4 points to 58.6 in November from October’s 16-month low of 58.6.  Based on an improved composite U.K. PMI of 57.6 after 55.8, Britain should register GDP growth of about 0.6% in the final quarter of 2014.

Sweden’s PMI services index dropped 0.7 points in November but still conveyed resilience at 56.9.

India’s composite and services PMI readings of 53.6 and 52.6 each constituted five-month highs in November, and inflation receded.

In contrast, the euro area services and  composite PMI scores both printed at 51.1, revised downward from their preliminary indications and at respective 17- and 16-month lows.  The composite PMI’s of Germany, France, Spain and Ireland were at 17-, 9-, 9-, and 5-month lows.  Italy’s index rose to a 4-month high but of only 51.2.  The French composite and service PMIs printed at a contractionary 47.9.

Russia’s service-sector PMI was 44.5, a 5-1/2 year low, and the composite PMI of 47.6 was a 6-month low.  At best, it looks like Russian GDP will fall 1.5% next year.

Hong Kong’s private PMI registered a sub-50 reading for a fourth straight time.  It was 48.8.  50 is the breakeven line between expansion and contraction.

South Africa’s private PMI retreated from October’s 22-month high of 52.7 to a score of only 50.5 in November. 

Australia’s services PMI was below 50 for a ninth straight month, edging up just 0.2 points to a lowly 43.8. 

Australia also reported the weakest quarter-on-quarter rise of GDP, just 0.3% in 3Q14, since the first quarter of last year.

Lebanon’s private purchasing managers index rose 0.7 points but stayed below 50 with a reading of 49.5.

Brazil’s services PMI also lay below 50, with a score of 48.1 after 48.4 in October.

Although back above 50 at 50.6 following 48.7 the month before, Japan’s services purchasing managers survey included weak confidence in the future.

China’s services PMI compiled by HSBC edged up 0.1 to 53.0; however, the composite Chinese PMI fell by 0.6 points to just 51.1.

The dollar since Tuesday’s close has risen 0.5% against the euro, 0.4% versus the yen and Swiss franc, and 0.2% vis-a-vis the kiwi and Aussie dollar.  It is down 0.4% relative to sterling and the loonie.  The yuan’s fixing value was the lowest in nine days.

In stock market action, share prices rose 1.6% in Taiwan, 1.5% in China, 1.3% in New Zealand and 0.3% in Japan.  Hong Kong’s Hang Seng index fell 1.0%.  In Europe, the ftse is down 0.2%, but share prices have climbed 1.3% in Spain, 1.0% in Italy, 0.5% in Germany and 0.3% in France.

The 10-year British gilt yield is four basis points firmer in spite of news of the first on-year drop in food prices there since at least 2006.  Overall shop prices declined 1.9% in the year to November.  The 10-year Japanese JGB is off 2 basis points, whereas the 10-year German bund is up a basis point.

Commodities are firmer today, Comex gold by 0.6% and WTI oil by 1.4%.

Retail sales in the euro area rose slightly less than forecast in October, increasing 0.4% from the prior month and 1.4% from October 2013.

Swiss GDP grew 0.6% last quarter, twice expectations, and posted a 1.9% increase from a year earlier.

U.S. productivity growth was revised to 2.3% last quarter, but the on-year advance was a disappointing 1.0% after a gain of 0.7% in the year to 3Q13.  Unit labor costs dropped 1% on quarter but posted the same benign 1.2% year-over-year gain as such had between 3Q12 and 3Q13.

The ADP estimate of U.S. private jobs created in November was 208K, lower than forecast and also below October gain of 233K.

U.S. mortgage applications fell even more sharply last week, 7.3%, than in the prior week of November 21.

On the central bank watching front,

  • The Bank of Canada kept its overnight interest rate target at 1.0%, the level since a 25-basis point hike in September 2010.
  • Poland’s central bank retained a 2.0% record low rate on its seven-day repo rate.  Cuts totaling 275 basis points were made between November 2012 and October of this year.  The last cut was by 50 basis points, surpassing expectations.
  • Brazil’s monetary policy committee, known as Copom, will be announcing its latest decision on the Selic rate later today.
  • The Bank of England and ECB release monetary policy statements tomorrow.

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



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