Service Sector PMI Surveys and a Whole Lot More Data This Wednesday

March 3, 2021

The dollar overnight rose 1.0% against the Mexican peso, 0.5% relative to the New Zealand dollar, 0.4% versus the Aussie dollar, 0.3% against sterling 0.2% on a trade-weighted basis and 0.1% versus the yen and loonie.

Sterling has remained steady on net, by contrast, continuing a pattern of comparative strength since the start of this year. In that short span, the dollar has fallen 2.1% against the pound, while advancing by 3.5% relative to the yen and 1.3% versus the euro. The British pound has benefited from the avoidance of a “no deal” Brexit, a much smoother vaccination program than in many other countries and especially when compared to Euroland, and better-than-feared growth.

Equity markets today jumped 2.7% in Hong Kong, 2.3% in India, 2.0% in China, 1.7% in Taiwan, 0.9% in Singapore, 0.8% in Australia and 0.4% in Japan. Stock indices in the U.K., Germany, and France are up about 0.5% thus far in spite of sharply higher 10-year sovereign debt yields in Europe. The 10-year U.S. Treasury yield is up 7 basis points, but U.S. stock futures point to a modest slide.

There is an OPEC oil ministers meeting tomorrow, and WTI oil has risen 1.2% today. Gold, in contrast, has slumped 1.3% and is only slightly above yesterday’s intra-day low.

Putting the purchasing manager survey results aside for the moment, here are some of the highlights from other data released today:

  • A 1.4% on-month jump in Euroland producer prices in January was the most in fifteen years and powered predominantly by a 3.5% increase in energy. Compared to January 2020, the PPI was unchanged, breaking a string of 17 months with on-year PPI deflation.
  • Private sector jobs in the United States, according to the monthly ADP analysis, increased by a smaller-than-expected 117K in February.
  • Australian GDP climbed by a faster-than-expected 3.1% on quarter in 4Q 2020, which trimmed the year-on-year drop to 1.1% from 3.8% in 3Q and 6.4% in 2Q. Growth in calendar 2020 was negative 4.8% after increases of 1.8% in 2019 and 2.8% in 2018.
  • Brazilian GDP rose 3.2% on quarter and fell 1.1% from a year earlier in the final quarter of 2020. This resulted in a negative 4.1% GDP growth rate last year.
  • Retail sales in Hong Kong have posted year-on-year declines since February 2019, and the slide of 14.5% in January was the most in six months.
  • Turkish inflation continues to rise. CPI inflation of 15.6% in February was the most in 19 months, while PPI inflation increased to 27.1%, the most in 21 months and up from a low last year of 5.5% in May.
  • Italian GDP last quarter dipped 1.9% from 3Q 2020, which represents a marginally smaller drop than first estimated. The contraction from the final quarter of 2019 was 6.6%, up from a drop of 5.2% in the year through the third quarter. On-year GDP growth in the final quarter of 2019 has also been negative but small at -0.2%.
  • Swiss CPI inflation in February matched January’s reading of -0.5%, which had been the least deflationary since March 2020.
  • Today was budget day in the United Kingdom. Chancellor of the Exchequer Sunak stole Mario Draghi’s famous euro-saving line in promising to do whatever it takes to counter the pandemic’s economic drag.

Today’s volume of purchasing manager surveys contain a mix of rising and falling operating conditions but also some similar threads that run through just about all the PMI reports: strengthening optimism that the distribution of vaccines offers a road to better economic conditions a year from now, supply chain disruptions, rising production costs, a drag from fresh social restrictions that hit service sector activity harder than manufacturing, and last, but not least, evidence that economies in the most recent Covid-19 wave have been considerably more resilient than in earlier waves of the pandemic.

Euroland‘s composite and service-sector PMIs were revised up from their preliminary February estimates and represent two-month highs of 48.8 and 45.7. This was the fourth straight month below the 50 neutrality line, strongly suggesting that the economy is tracing a double-dip recession, that is multiple quarters of contraction on both sides of last summer’s strong economic recovery.

Japan‘s composite and service sector PMI scores (48.2 and 46.3) remained below 50 but were above January’s readings.

The British composite purchasing managers index improved to a 2-month high but at 49.6 was south of 50 for a second straight month and accompanied by the fourth straight sub-50 services PMI reading (49.5).

In February, China experienced 10-month lows in its composite and service sector PMIs of 51.7 and 51.5.

But India had its strongest improvement of service sector operating conditions in a year that helped lift the composite PMI to a 4-month high of 57.3.

Russia’s service sector PMI slid to a 2-month low of 52.2, but the composite PMI reading rose to a 5-month high of 52.6.

Sweden‘s service sector PMI rose 3.1 points to a 38-month high of 62.7, and the composite PMI of Sweden climbed 2.2 points to 62.4.

Australia‘s composite and service sector PMI readings of 53.7 and 53.4 constitute 4- and 5-month lows. The Australian construction purchasing managers survey also was reported, and this slid to a 2-month some 0.2 points below December’s 41-month high.

Non-oil PMI surveys were published for Egypt (a 3-month high of 49.3), Saudi Arabia (a 4-month low of 53.9) and the United Arab Emirates (a 3-month low of 50.6).

Four additional private sector PMI releases for February revealed a 3-month high of 50.0 in Hong Kong, a 32-month high in Singapore of 54.9, a 2-month low in South Africa’s Standard Bank index of 50.2, and a 3-month high in Lebanon of 42.2.

The Institute of Supply Management’s U.S. non-manufacturing PMI fell back 3.4 points in February to 55.3 under the strain of tighter Covid restrictions. The sub-index for orders dropped by 9.9 points, while the prices index went up 7.6 points to 71.8.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: , , , ,


Comments are closed.