Uneven Manufacturing Trends Around the World

February 1, 2022

The dollar slipped 0.2% overnight on a weighted basis, losing 0.6% against the Swiss franc, 0.4% relative to the yen, Aussie dollar, Mexican peso and sterling, but just 0.2% versus the euro and 0.1% against the loonie.

Stock markets in those Pacific Rim countries that were open and in Europe rallied robustly, taking their cue for the recent U.S. rebound. U.S. futures are little changed.

Ten-year sovereign debt yields on this first day of February fell by three basis points in the U.S. and U.K. and by a basis point too in Germany. The price of West Texas Intermediate oil, which soared in January, settled back 0.5% overnight. Gold is pretty steady and slightly above $1,800 per ounce.

The first meeting of the Reserve Bank of Australia‘s policy board announced moves that were expected. Officials left the OCR interest rate unchanged at a record low of 0.1% and issued forward guidance that it will not start rising for some time longer. Market players anticipate an increase by midyear, in contrast. The Board concedes that near-term inflation will be higher than expected previously but are unconvinced that the current elevation is a precursor to sustainable in-target (2-3%) inflation because wage pressure is still modest. As expected, the RBA bond-purchase stimulus program will be terminated after next week.

In Kyrgyzstan, the National Bank’s policy interest rate was raised by another 50 basis points to a six-year high of 8.5%. This was the fifth rate hike in the past year from a pandemic low of 5.0%. CPI inflation in Kyrgyzstan has accelerated to a tad above 11%.

Several countries had closed  markets in observance of the Lunar New Year, including China, Taiwan, Hong Kong, Indonesia, Malaysia, the Philippines, and Vietnam.

Being the first day of a new month, however, considerable economic data were reported around the world, mostly a slew of manufacturing purchasing manager surveys that revealed how unevenly both within the euro area and among other economies countries are coping with the latest wave of the Covid-19 pandemic. In some cases, inflationary pressures and supply chain disruptions appear to be lessening, but those problems in other cases stayed as severe as ever. Optimism about the future likewise was mixed in the first month of 2022.

Euroland’s factory purchasing managers index was revised down 0.3 points but, at 58.7, still printed at a 5-month high. In spite of Ukraine concerns, the prospect of Fed and Bank of England tightening, and recently soaring oil prices, business sentiment climbed to a 7-month high, and the subindex for input prices was at a 9-month low. But within the joint currency bloc, Spain’s PMI remained at a 10-month low, and the readings for Italy, Greece and France fell to 11-, 6-, and 3-month lows.

Japan‘s manufacturing PMI of 55.4 was revised up from a preliminary estimate of 54.6 and above December’s 54.3 reading. The overall score indicated the strongest rate of improving factory conditions in 95 months. A separate Japanese data release this Tuesday revealed an unexpected 0.1 percentage point dip in the jobless rate to a 2-month low of 2.7% in December, which was accompanied by a modest uptick of the ration of job offers to applicants.

In Great Britain, where Brexit has complicated the economic effects of Covid and where botched and unpopular handling of the pandemic have cost Prime Minister Johnson considerable political capital, January’s factory PMI of 57.3 proved surprisingly resilient, albeit still at a 4-month low.

The Danish, Russian, Swiss, and Swedish manufacturing PMIs in January rose to 11-month, 8-month, 3-month and 2-month highs last month of 60.9, 51.8, 63.8, and 62.4. The Hungarian, Polish Norwegian, and Czech PMI’s of 50.7, 54.5, 56.5 and 59.0 represent 10-, 3-,12- and 2-month lows, in contrast.

India‘s manufacturing PMI of 54.0 and sub indices for production and orders were at 4-month lows, and sentiment about future business conditions sank to a 19-month low.

In Turkey, where inflation has soared and measures have been taken to prevent lira depreciation, the manufacturing PMI barely held above the 50 line of neutrality, printing at an 8-month low of 50.5.

Factory conditions also lost momentum in Australia. The IHS-compiled manufacturing PMI fell 2.6 points to a 5-month low of 55.1, while the AIG-compiled index crossed through the 50 level to a 16-month low of 48.4.

Thailand’s PMI reading of 51.7 was 2.2 points above the December level and at a record high.

The Absa-compiled South African PMI climbed three full points to a 2-month high, buoyed by lessening Covid restrictions last month.

In Brazil, manufacturing sector conditions remained in contractionary territory for a third straight month, dropping to a 20-month, sub-50 reading of 47.8.

The U.S. IHS-compiled PMI report also underperformed expectations by a significant margin, dropping 1.7 points in January to a 15-month low of 55.0.

Turning to other reported data, investors learned of a huge 5.5% monthly plunge  in German retail sales volume during December that left the level unchanged from the end of 2020. In 2021 as a whole, retail sales rose 2.9% nominally but only 0.7% when adjusted for rising inflation. On a brighter note, Germany’s labor market has not been hurt by Omicron and accompanying measures against social activity. The jobless rate dipped 0.1 percentage point in January, and the number of unemployed workers dived by 48 thousand.

French consumer price inflation of 2.9% in January was a half percentage point above street expectations and the most in 160 months.

Brazilian producer prices slid 0.1% on month in December and posted the lowest year-on-year increase (28.4%) in 11 months.

Unemployment in the euro area fell to a record low 7.0% in December from 7.1% in November and 8.2% a year earlier.

The British Nationwide house price index recorded a 7-month high 11.2% year-on-year advance last month.

Swiss retail sales fell 2.0% on month and 0.4% on year in December, its first and largest year-on-year decline since July. Consumer confidence in Switzerland recorded a negative reading in 1Q 2022 for the first time since 2Q 2021.

Czech GDP expanded 0.9% on quarter and 3.6% on year during 4Q 2021.

Reflecting Omicron, Australian retail sales posted their greatest monthly decline in 20 months during December.

Monthly Canadian GDP measured from the supply side rose by a robust 0.6%  in November following a 0.8% increase in October and was 3.8% above its year-earlier level. Activity in the latest month was mainly powered by mining and services.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permssion.

 

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