More Evidence that Tariffs Are Hurting Manufacturing All Over

July 24, 2019

Preliminary purchasing manager survey results from July in Japan, Australia, Euroland, and the U.S. were published today, and their main message is that trade wars hurt just about everybody.

  • Japan’s manufacturing PMI printed below 50 for a third straight month and the fifth time in six months. Readings under 50 imply a contraction of activity. July’s score of 49.6 was 0.3 points higher than June’s, implying somewhat slower deterioration. Japan’s composite PMI  of 51.2 remained above 50, however, thanks to a joint 9-month high in service sector activity.
  • Australia’s composite, manufacturing and service sector PMI readings compiled by CBA slipped to 2-month lows this month of 51.8, 51.9, and 51.4.
  • Euroland’s manufacturing PMI slumped to a 79-month low of 46.4 from 47.6 in June and 51.6 in May. The services PMI was above the 50 threshold but at a 2-month low of 53.3. The euro area’s composite purchasing managers index thus fell 0.7 points to a 3-month low of 51.5, implying economic growth overall of only about 0.1% at the start of the third quarter. That’s about half as much as was seen in 2Q.
  • Among countries using the euro, German manufacturing has been especially hammered. Germany’s factory PMI reading dropped 1.9 points to a 7-year low of 43.1, and its services PMI concurrently ticked down 0.4 points to 55.4. Officials warned that Germany may be entering a technical recession.
  • The French manufacturing PMI dropped 1.9 points to 50.0, implying neither growth nor contraction. France’s services and overall composite PMI scores slid to 2-month lows of 52.2 and 51.7, which would be consistent with modestly slower third quarter GDP growth of about 0.25%.
  • IHS also conducts a survey of U.S. purchasing managers, and that say manufacturing stagnate as well. The U.S. manufacturing PMI printed 0.6 points lower at 50.0, its first reading not above that threshold in 118 months. The composite U.S. PMI score of 51.6 suggests that both second- and third-quarter GDP growth may be on the south side of 2.0%.

In financial market developments this Wednesday, there’s been little net movement in the dollar. Ten-year sovereign debt yields are down three  basis points in the U.S. and Germany and by a basis point in Great Britain. Share prices rose 0.4% in Japan and Hong Kong and by double that in China, but such fell 0.9% in South Korea, 0.6% in New Zealand and 0.4% in India. WTI oil and Comex gold strengthened 0.8% and 0.5%.

Other economic data reported from Euroland today showed that the French business climate in July fell back to April’s level. Czech business confidence tumbled to its weakest level since August 2014, but consumer sentiment there went up to a 5-month high. Belgian business sentiment, which previously this year had softened noticeably, stabilized in July with a reading of -5.0 after -4.9 the month before. Finnish producer prices tumbled 1.1% in June, resulting in the first negative year-on-year change (-0.9%) since October 2016. Last but not least, on-year growth in Euroland’s stock of M3 money decelerated to 4.5% in June as a result of a greater drop in marketable securities. M3 in the second quarter was 4.7% greater than a year earlier, but total credit in June surpassed its year-earlier level by just a lowly 2.2%.

South African CPI inflation printed at 4.5% in June, which represents a joint 7-month high.

Malaysian CPI inflation accelerated to a 13-month high of 1.5% in June.

China’s indices of leading and coincident economic indicators went up by 0.9% and 1.1% last month.

U.S. new home sales rebounded 7.0% in June to a two-month high and were also 4.3% greater than a year earlier.

Former Special Counsel Mueller is testifying in congress today.

Copyright 2019, Larry Greenberg. All rights reserved.  No secondary distribution without express permission.

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