PMI Report Card and Other News

June 1, 2016

Today is the first day of June, a month that sees the ECB Governing Council meet tomorrow and both the FOMC and BOJ Board hold policy meetings at mid-month.  Markets only discount a one in four chance of Fed tightening this month but more than even odds for an interest rate increase by the July meeting.

The dollar, which rose strongly last month, is 1.4% weaker against the yen and has fallen against most other advanced economy currencies, too.

Stocks fell 1.6% in Japan, 1.4% in Hong Kong and 1.0% in Australia, and European equity markets have weakened significantly as well.

West Texas Intermediate crude oil shows a 1.3% drop to $48.48 per barrel on signs of OPEC disunity.  Comex gold is up 0.3% at $1,220.60 per ounce.

The 10-year British gilt yield to 1.38%.

A new Economic Outlook from the OECD contains the latest sharp warning about dire consequences should Brexit be approved by voters.  2016 global GDP is projected to grow 3.0%, with gains of 1.8% collectively by OECD members including the U.S. (also 1.8%), eurozone (1.6%), Japan (0.7%), and China (6.5%).  Brazilian GDP is expected to plunge 4.3% this year.

May purchasing manager manufacturing survey results were not particularly encouraging:

  • China 49.2, a 3-month low with declines in output, orders and jobs.
  • Japan 47.7, a 40-month trough.
  • Euroland 51.5, same as the preliminary estimate but down from 51.7 in April.  Conditions actually deteriorated in Greece (48.4, a 3-month low) and France (48.4, a 2-month high).  Ireland’s 51.5 score constituted a 34-month low, and Spain’s 51.8 is a 7-month low.  Germany and The Netherlands had 4- and 2-month highs of 52.1 and 52.7.  Italy’s 52.4 is a 3-month low.  All in all, the data point to slower Euroland GDP growth this quarter than last.
  • Great Britain 50.1, a two-month high but weak nonetheless.
  • Australia 51.0, a 7-month low.
  • Sweden 54.0, unchanged from April’s 3-month high.
  • Switzerland 55.8, better than expected and up from 54.7 in April and just 50.0 in January.
  • South Africa 51.9, a two-month low.
  • Turkey 49.4, a 3-month high.
  • Russia 49.6, a 3-month low and still below the 50 level that separates improvement from deterioration.
  • Taiwan 48.5, a 7-month low after 49.7 in April.
  • South Korea, 50.1, a 2-month high but just stagnation.
  • Vietnam a one-year high of 52.7.
  • Malaysia 47.2 after a 5-month low in April of 47.1.
  • Indonesia — a third straight reading of 50.0 or better, albeit just 50.6 following 50.9 in April and 50.6 in March.
  • Brazil — 41.6 after 42.6 in April and 46.0 in March.  The recession deepened.
  • The Chinese government also released its official manufacturing and non-manufacturing survey results.  The former matched the April reading of 50.1, whiel the latter dipped 0.4 points to 53.1.

The Bank of Iceland kept the 7-day collateralized lending rate at 6.5% but cut its reserve requirement by 50 basis points to 2.0%.  A released statement maintained, however, that higher interest rates will be needed fairly soon.

Australian GDP growth in 1Q16 of 1.1% on quarter was led by faster-than-expected export growth and thus beat analyst expectations.  On-year growth accelerated to 3.1% from 2.9% in 4Q15 and 2.3% in 1Q15.

Swiss GDP rose just 0.1% last quarter, undershooting expectations.  GDP was 0.7% greater than a year earlier.

British shop prices fell 1.8% in the year to May.  M4 money in the U.K. was just 1.0% greater in May than a year earlier.  The Nationwide index of British home prices decelerated to a 12-month increase of 4.7% in May from 4.9% in April and 5.7% in March.

Japanese motor vehicle sales were 6.6% higher than a year earlier in May, down from a 7.2% rise in the year to April.  However, on-year business investment growth of 4.2% in Japan last quarter was somewhat above what had been assumed previously.

In the year to May, consumer prices rose 3.3% in Indonesia but just 0.5% in Thailand.  Thai producer prices fell 1.4% on year.

U.S. releases today feature its manufacturing purchasing managers survey, auto sales, the Fed’s Beige Book and construction spending.  Last week, U.S. mortgage applications dropped back 4.1%, as the 30-year fixed mortgage rate held steady at 3.85%.

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

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