U.S. Economy Pulling Out Ahead of the Crowd of Other Economies
December 16, 2024
The S&P Global U.S. preliminary composite purchasing managers index jumped 1.7 points to a 33-month high of 56.6 in December. This result far exceeded analyst expectations, led by the service sector whose subindex reached a 38-month high on the prospect of widespread deregulation by the incoming Trump administration.
America’s good December report card contrasted with other economic news around the world today.
- The German and French composite PMI readings for this month were each well below the neutral 50 threshold at 47.8 and 46.7, including 3- and 55-month manufacturing lows of 42.5 and 41.9, respectively.
- Although smaller economies within the euro area fared better than the two largest ones, the joint currency bloc’s comp0site PMI recorded a second straight sub-50 reading, this time of 49.5, and indications of weak demand were accompanied by an uptick in inflation.
- The British preliminary PMI survey’s overall reading of 50.5 matched November’s 13-month low, and confidence in the 1-year future outlook softened to a two-year low there.
- Although up to a 3-month high, Japan’s composite PMI was only at 50.8, and Australia‘s score of 49.9 was below 50 for the second time in four months.
Among developing economies, India remained the shining star, with a four-month high composite PMI of 60.7 that beat market expectations. Other Indian economic data releases today highlight lessening inflation. Wholesale price inflation eased to a 2-month low of 1.89% in December, undershooting analyst forecasts and dropping almost a half percentage point below November’s pace despite a pickup in manufacturing sector wholesale price inflation. But India’s trade deficit swelled to a record high in November of $37.8 billion from $27.1 billion in October and $20.6 billion in November 2023.
The gestalt of China’s bundle of economic data reports today did nothing to alleviate concerns that several policy efforts over the past year to promote growth are falling far short of what’s needed.
- On-year growth in retail sales slowed to 3.0% in November from 4.8% in October, and the 11-month year-on-year increase of 3.5% was less than half the full-2023 increase of 7.2% in sales.
- House prices in China fell 0.5% on month and 5.7% on year in November. Construction has been depressed all year and has infected several additional sectors of China’s economy.
- Fixed asset business investment rose 3.3% on year in January-November down from a 6.0% full-2023 advance.
- Foreign direct investment over the first eleven months of this year was 27.9% lower than in the same period of 2023. The full-2023 FDI decline had been 8.6%.
- China’s jobless rate last month was the same as in October, 5.0%.
- On-year growth in industrial production ticked up 0.1 percentage point to 5.4% last month.
The big event of this week will be the FOMC interest rate decision on Wednesday, not just whether the expected 25-basis point interest rate cut in fact is done but also what is implied in updated forecasts and whatever forward guidance Chairman Powell decides to share. In the meantime, U.S. financial markets opened this week in a somewhat unremarkable way. The positive reaction to the U.S. PMI figures was not universally shared. While the Nasdaq and S&P 500 show gains of 0.9% and 0.4%, the DOW at marginally lower. The 10-year Treasury yield edged a basis point higher, and the dollar is mixed, with drops of 0.6% against sterling, 0.2% relative to the Australian dollar, and 0.1% versus the euro. At the same time, the dollar is 0.4% higher against the yen and earlier today touched its strongest Canadian dollar level (1.4275 in 57 months).
Bitcoin’s price of $106,534 set another record high, but WTI oil’s price fell 0.6%.
In stock market action around the Pacific Rim, share prices closed down 0.9% in Hong Kong and Indonesia but unchanged in Japan. European equities are somewhat lower. Ten-year sovereign debt yields climbed three basis points in Japan and Great Britain and two bps in Germany but show no net changes in France, Italy or Spain.
Hourly labor cost inflation in the euro area last quarter was left unrevised from the earlier estimate of 4.6%.
The combined Swiss PPI/import price index dropped 0.6% on month and 1.5% on year in November. Import prices were 3.8% below year-earlier levels, while domestic producer prices dropped 0.4%.
In Kyrgyzstan, by contrast, consumer price inflation rose 1.1 percentage points to a 10-month high of 5.7%.
In Pakistan, where CPI inflation has declined from 38.0% in May 2023 to a 67-month low of 4.9%, the central bank today implemented its fifth interest rate reduction since June. The latest cut was from 15% to 13%, which is nine percentage points below the 22% peak first reached in June 2023 and maintained for a year.
Japan’s tertiary index of service sector activity rose 0.3% on month and 1.7% on year in October. The 12-month increase was above 1.0% recorded over the first three quarters of 2024 but less than 1.9% in full-2023.
Core domestic machinery orders in Japan outperformed expectations in October, rising 2.1% on month and 5.6% on year. In this first month of the second half of the economy’s fiscal year, machinery orders from abroad and the government each posted big increases.
In the U.S., the Empire State manufacturing index fell back to a 2-month low in December of 0.20 after November’s 35-month high of 31.2.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese retail sales and industrial production, Japanese machinery orders and tertiary index, preliminary December 2024 PMI findings, State Bank of Pakistan
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