Manufacturing in Recession Here, There and Just About Everywhere

December 1, 2022

November purchasing manager surveys released today paint a very gloomy picture, with activity declining at the fastest pace since May 2020 (near Covid ground zero) in the United States (according to both the ISM and S&P Global reports), Brazil, Australia (AIG survey), Turkey, Ireland, Czech Republic, and Sweden. Japan’s PMI index got revised downward and  matched a 25-month low. Although above the 50 neutral level, Switzerland’s survey reflected the slowest growth in 25 months. In the Pacific Rim, the Malaysia and Vietnamese PMIs printed at 15- and 14-month lows, and South Korea, Taiwan, and China also were in contractionary territory. Britain’s PMI ticked 0.3 points higher  but was weak overall at 46.5. All reporting  euro area members (Ireland, Italy, Greece, Germany, France, Austria, the Netherlands, and Spain) fell within a range of 45.7 (Spain) to 48.7 (Ireland). The Danish (45.5), Polish (43.4), and Canadian (49.6) readings also landed below a score of 50, and India’s 50.3 indicates near stagnation.

PMI news was enough to snuff out yesterday’s equity rally. The DJIA is down 1.0% and European share prices are little changed. Earlier in the day, stocks  closed up 1.0% in Australia, 0.9% in Taiwan and Japan, 0.8% in Hong Kong, but down 0.9% in Indonesia.

Mounting recessionary fears and indications of a subsiding supply disruptions, which had been a key force behind elevated inflation, continue to depress long-term interest rates. Ten-year sovereign debt yields are down 14 basis points in Italy, 11 bps in France and Spain, and 9 bps in Germany and Great Britain, but the 10-year U.S. Treasury yield rebounded a basis point.

The dollar  continues to give back  gains, dropping 0.9% on a weighted basis overnight, including losses of 1.6% against sterling, 1.4% versus the  yen, 1.0% relative  to the Aussie dollar, 0.8% against the euro, 0.7% vis-a-vis the yuan and Mexican peso, but just 0.3% against the Swiss franc. The Canadian dollar, which among major currencies has moved most closely with the dollar lately, actually dipped 0.1%.

Prices for gold and WTI oil are about 3.0% above Wednesday closing levels, but new trouble has enveloped the crypto world, where Bitcoin is  down 1.3% and below $17k.

Among other economic data released today,

U.S. personal income jumped by a greater-than-forecast 0.7% in October, and personal consumption expenditures went up 0.8% or 0.5% when adjusted for inflation. The total and core PCE price deflators advanced by 0.3% and 0.2% relative to September and by smaller year-on-year amounts than in September, namely 6.0% and 5.0%, respectively. U.S. construction spending, down 0.3% in October, remains in the doldrums, but new jobless  insurance claims unexpectedly fell 16k to a 2-week low.

Retail sales in Europe have been squeezed by elevated inflation. In October, German sales sank 2.8% in October and were 5.0% lower than in October 2021. Similarly, Swiss retail sales dropped 2.7% last month and were down 2.5% year-on-year.

Retail sales in Hong Kong leaped 13.6% and recorded the greatest 12-month rate of  increase (2.4%) in a half year.

Japanese consumer confidence worsened 1.3 index points to a 29-month low of 28.6.

So far, inflation and monetary tightening have had little effect on unemployment. Earlier this week, Japan reported a 2.6% jobless rate in October, and Euroland data collectors today revealed and unexpected 0.1 percentage point further  dip of unemployment to a record low of  6.5%, which also compares favorably against 7.3% in October 2021.

Manufacturing confidence in Mexico dropped to a 19-month low last month, but in Thailand business confidence rebounded a bit above October’s 9-month low.

South Korean quarterly real GDP growth slowed to a one-year low of 0.3% in the summer, and Hungarian GDP fell 0.4%, marking the worst performance in nine quarters.

Labor productivity in Canada surprised significantly on the upside with a 0.6% quarterly advance in 3Q 2022, which dampened the rise of unit labor costs to 0.5%. Compared to a year earlier, productivity dipped 0.3%, and unit labor costs rose 4.8%.

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


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