Manufacturing PMIs, U.S. Presidential Primaries, and the Start of a New Month

March 1, 2016

Today is Super Tuesday in America, with primaries in Texas, Virginia, Alabama, Arkansas, Georgia, Oklahoma, Tennessee, Massachusetts, Minnesota and Vermont for both Democrats and Republicans and also Colorado for the Democrats and Alaska for Republicans.

A slew of February manufacturing purchasing managers surveys were released already.  In 22 reporting countries, conditions worsened, i.e. growth slowed or contraction quickened.  In seven cases, there was improvement.  India recorded the same reading, 51.1, as January’s 4-month high.

Market tone this Tuesday has been better than yesterday.

  • Share prices rose 1.7% in China, 3.4% in India, 0.9% in Australia and Taiwan, 0.8% in New Zealand, 0.6% in Singapore and 0.4% in Japan. 
  • Share prices in Europe thus far show rises of 1.6% in Italy, 1.5% in Germany, 1.1% in Spain, 0.8% in the U.K., Switzerland and Greece and 0.7% in France.
  • U.S. stock futures are higher.
  • West Texas Intermediate crude oil advanced 1.7% to $34.31 per barrel.  With the exception of yesterday, global share prices and the cost of oil have been pretty positively correlated of late.
  • Comex gold is 0.7% firmer at $1,246.93 per troy ounce.
  • Ten-year British gilt and German bund yields are up three and two basis points.  A higher Treasury yield is suggested by the futures.  Japan’s 10-year JGB yield is unchanged at -0.07%.
  • The dollar is unchanged against the yuan, euro and Swiss franc.  It has recovered 0.3% against the yen but shows losses of 0.4% versus sterling, 0.2% relative to the Australian dollar and 0.1% vis-a-vis the loonie and kiwi.

As expected, the Reserve Bank of Australia left the Official Cash Rate unchanged at 2.0%, its level since a 25-basis point cut last May.  The released statement retained the option to ease further if needed.

Euroland’s manufacturing PMI printed at a 12-month low of 51.2 in February, 0.2 points above the preliminary indication but 1.1 points lower than in January.  Within the eurozone, only Austria and France reported a better reading than in January, a 4-month high of 51.9 and a 2-month high of 50.2, respectively.  And only Austria had strengthening export orders.  Ireland’s 52.9 score was at a 24-month low.  Germany’s 50.5 implied near stagnation and was the worst reading in 15 months.  The Dutch PMI fell to 51.7, an 18- month low.  Italy’s 52.2 was a one-year low.  The readings for Spain of 54.1 and and Greece of 48.4 were at 2- and 3-month lows.  The Greek index had been at 50.0 in January and 50.2 in December, but now implies contraction again.  For Euroland as a whole, employment, orders and production all had weaker readings in February than in January.

Britain’s manufacturing PMI slumped 2.1 points to a 34-month low of 50.8, with sharp deceleration in both output and demand, plus significant deflationary pressure.

Japan’s manufacturing PMI fell 2.2 points to a 5-month low of 50.1, reinforcing the market’s dim view that negative interest rates will do any good.

There were three PMI’s for China.  The Caixin manufacturing index dropped 0.4 points to a 5-month low of 48.0.  The government-authorized manufacturing index also fell 0.4 points to 49.0, while its non-manufacturing counterpart of 52.7 was at an 87-month low.  Chinese GDP growth slowed from 11.8% on year in the first quarter of 2010 to 6.8% in the final quarter of last year according to official data that lack investor credibility.  Many folks think the economy is now actually growing no more strongly than 5% and perhaps less. 

The economies besides Austria and France that had stronger February than January manufacturing readings are Switzerland (a 6-month high of 51.6), Australia (up 2 points to 53.5), South Africa (still sub-50 at 47.1, however), Hungary (a 3-month high of 54.8), and Poland (a 7-month high of 52.8).

Sweden’s PMI dived 4.3 points to an 18-month low of 51.6. Norway’s fell a full point to a 2-month and sub-50 score of 48.4. 

The Czech factory PMI, 55.5, was the lowest since November. Brazil’s PMI dropped 2.9 points to a 3-month low of 44.5.

Russia posted a sub-50 score for a third straight month, implying deteriorating activity.  It printed at 49.3, down from 49.8.

Taiwan’s 49.4 ended a 2-month streak of above-50 readings.  Indonesia’s index fell 0.2 points to 48.7.  Vietnam’s 50.3 was a 3-month low. Malaysia’s 47.3 was the lowest since November.

Turkey’s PMI scored a 50.3, down from 50.9 and a 4-month low.

Japanese unemployment unexpectedly slipped from 3.3% in both November and December to 3.2% in January.  The job offers ratio improved to 1.28, and on-year growth in employment accelerated sharply to 1.4%.

Real household spending in Japan fell 1.1% on month in January and was 3.1% lower than a year earlier.  Japanese motor vehicle sales recorded a 4.6% year-over-year drop in February.  Japanese business investment grew 8.5% between the final quarters of 2014 and 2015.

Eurozone unemployment slid 0.1 percentage point to 10.3% in January.  That compares to 11.3% a year earlier and 11.8% in the first month of 2014.  Youth unemployment of 22.0% remains an enormous social problem.

German unemployment dropped 10K in February after a combined 34K decline in the previous two months.  Employment growth accelerated to 1.2% on year in January from 1.0% last quarter, 0.8% in 3Q15 and 0.7% in the first half of 2015.

Italian unemployment dipped 0.1 percentage point to 11.5.  Italian real GDP expanded 0.8% last year versus a 0.4% contraction in 2014.

Swiss retail sales, up 0.2% in January from a year earlier, recorded the first such rise since July, but sales were 0.3% lower than in December.

South African GDP growth of 0.6% in the final quarter of 2015 was down from 0.7% in 3Q and 1.0% in the second quarter.  GDP rose 1.3% in 2015 versus 1.5% in 2014.

Australia’s current account surplus widened 12% on quarter to A$ 21.106 billion.  In real terms, net foreign demand had neither a positive nor negative effect on GDP growth.  Building permits in Australia dropped 7.5% in January after advancing 8.6% the month before.

Canadian real GDP growth at a seasonally adjusted annualized rate slowed to 0.8% last quarter from 2.4% in the summer.  There had been a 2-quarter mini-recession in the first half of 2015, so calendar year growth of 1.2% in 2015 was the lowest since 2009.

Monthly GDP in Canada rose 0.2% in December but was only 0.5% greater than a year earlier.  Industrial production stagnated in December and recorded a 2.1% on-year drop.  Energy contracted 1.2% in the month, producing a 2.6% 12-month rate of decline.  But services increased 1.7% on year.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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