June PMI Reports Put Spotlight on Deteriorating Factory Conditions Around the World
July 3, 2023
The observance of Canada Day and tomorrow’s Independence Day holiday in the United States will deprive market activity in the early part of this week.
U.S. stock futures are little changed from Friday’s elevated closing levels. Share prices in Europe are similarly quite steady, whereas Asian markets took their lead from Friday’s rally, with gains of 1.8% in China, 2.1% in South Korea, 1.8% in China and India, 1.0% in Taiwan but just 0.6% in Australia. Pakistan’s stock market experienced a particularly sharp 6.2% upsurge, goosed by news of a $3 billion IMF bailout loan.
The dollar firmed overnight by 0.4% against the yen and Swiss franc, 0.2% relative to the Australian dollar and sterling, and 0.1% versus the euro. Even greater advances were secured against the Russian ruble and Turkish lira. Prices are up 0.8% and 0.2% for oil and bitcoin but down 0.4% in the case of gold.
Ten-year German and British sovereign debt yields have each risen four basis points versus only a 1-bp uptick overnight in the U.S. 10-year Treasury yield.
Euroland’s June manufacturing purchasing managers index has been revised a tad lower to a 37-month trough of 43.4. Production and industrial orders shrunk, but so did pricing pressure. The PMI readings of individual euro zone members ranged from a 38-month low of 39.0 in Austria to a 2-month Greek high of 51.8. Greece was the only one of eight such reports to print above the 50-level that divides improving from deteriorating factory conditions. The data are consistent with another likely contraction of Euroland industrial production during 2Q.
Numerous other purchasing manager surveys were published today. Manufacturing PMI scores fell in June to two-month lows of 49.8 in Japan, 50.5 in China, 48.2 in Australia, 57.8 in India, and 52.6 in Russia. South Africa‘s 47.6 reading and the Filipino score of 50.9 were each the lowest in 11 months, and Hungary and the Czech Republic had 37-month lows of 44.2 and 40.8 in June. Poland‘s 45.1 reading constituted a 7-month low. Britain‘s PMI dropped 0.6 points to a 6-month low of 46.5, while Thailand‘s index slumped from 60.4 in April and 58.3 in May to a 3-month low of 53.2. Sweden‘s manufacturing PMI rebounded from May’s 3-year low but, at 44.8, still reflected a pretty pronounced rate of deterioration. Like Sweden, Norway‘s PMI rose to a 2-month high but remained below the 50 threshold at 48.0. Vietnam‘s 46.2 reading was below 50 for a fourth consecutive time but higher than in May and thus reflective of a slightly less rapid pace of deterioration in manufacturing conditions. Taiwan (44.8 after 44.3) also experienced a somewhat lessened rate of deterioration than in May. Ditto for Switzerland, whose PMI rose to a 2-month high of 44.9. Indonesia‘s PMI rose from a half-year low of 50.3 in May to a 2-month high in June of 52.5.
The Bank of Japan’s quarterly survey of corporate conditions and expectations, known as the Tankan and this time including 9,147 participating firms, revised business investment last fiscal year upward and projects even livelier factory investment growth in the current fiscal year through March 31, 2024 of 19.3% for large manufacturers, 13.4% for all manufacturers and 11.8% for all firms. The diffusion measure of business conditions faced by big manufacturers rose by a greater-than-anticipated four points to +5 and is projected to reach +9 in the summer quarter. The diffusion index for big non-manufacturers increased 3 points to +23 but is projected to reverse to +20 over the coming three months. Among all firms, the diffusion index rose from +5 in March to +8 currently and is seen likely to print at +7 in September.
Swiss CPI inflation decelerated half a percentage point to a 17-month low of 1.7% in June. That half as much as the 297-month high of 3.5% experienced last August.
Indonesian consumer price inflation also slowed in June, printing at a 14-month low of 3.5%, down from 4.0% in May and an 83-month high of 5.95% last September.
New Zealand building permits fell 2.2% in May, marking their fifth monthly decrease in six months. But permits in Australia more than reversed April’s 6.8% slide with a 20.6% leap in May.
Turkey experienced its smallest trade deficit ($5.396 billion) in 19 months during June, but the year-to-date deficit of $308 billion was little changed from a shortfall of #303 billion in the first half of 2022.
Investors now await the U.S. manufacturing purchasing managers survey due later this morning.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan Tankan survey, manufacturing purchasing manager surveys
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