Markit / JMMA Japan Manufacturing PMI – Jul 2014
“Latest data signalled that operating conditions in Japan‟s manufacturing sector improved only slightly in July. Output contracted at a fractional pace, while new orders grew for the second month running but only modestly. Subdued client demand due to the rise in the sales tax was linked by panellists to relatively weak market conditions. In contrast, new export orders rose for the first time in four months in July, with a number of companies citing new overseas project wins. Payroll numbers remained in growth territory for the twelfth month running, although the rate of expansion was marginal.
The headline seasonally adjusted Markit/JMMA Purchasing Managers‟ IndexTM (PMITM) – a composite indicator designed to provide a single- figure snapshot of the performance of the manufacturing economy – posted at 50.5, down from 51.5 in June, signalling a weaker rate of improvement in overall operating conditions.
Manufacturers in Japan reported a fall in output from a previous month of growth during July. That said, the rate of contraction was only fractional. According to panellists, the increase in the sales tax was still having a detrimental effect on production levels.
Data suggested that muted domestic demand hindered overall new work wins, as new export orders rose for the first time since March. The pace of increase, however, was weak with the majority of surveyed companies (more than three-quarters) observing no-change in export levels in comparison to June. Total new work continued to increase, but at a slower and modest pace compared to June. Those firms which noted a rise in new orders attributed this partly to the launch of new products.”
Markit Economics, “Markit / JMMA Japan Manufacturing PMI – Jul 2014“, 1 Aug 2014 More
HSBC China Manufacturing PMI – Jul 2014
“Latest data signalled a second successive monthly improvement in overall operating conditions faced by Chinese manufacturers in July. Output and total new orders both rose at the strongest rates since March 2013, while new export work increased at the second- fastest pace in over three-and-a-half years. In response to stronger inflows of new work, purchasing activity rose solidly while job shedding eased for the second successive month and was only slight. Meanwhile, input price inflation accelerated to the strongest since last November.
After adjusting for seasonal factors, the HSBC Purchasing Managers’ IndexTM (PMITM) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 51.7 in July, down slightly from the earlier flash reading and up from 50.7 in June, and signalled a further improvement in the health of China‟s manufacturing sector. Furthermore, it was the strongest rate of improvement for a year-and-a-half.
Chinese manufacturers signalled a second consecutive monthly rise in production during July. The rate of output growth accelerated from June to the quickest in 16 months. A number of panellists suggested that production rose in line with greater volumes of new work, which was highlighted by a solid increase in total new business placed at Chinese goods producers. New work from abroad also rose at a faster pace in July, with the latest expansion of new export order books the second-strongest in 44 months.
Purchasing activity increased for the third month running in July. Furthermore, the rate of increase accelerated to the fastest since last October. Anecdotal evidence suggested that input buying rose in line with stronger inflows of new work and subsequent plans to raise productive capacity. As a result, stocks of purchases increased, albeit marginally, following no change in June.
Encouragingly, job shedding at Chinese manufacturing companies eased in July, with the latest fall in workforce numbers the weakest since March. Meanwhile, capacity pressures persisted, as signalled by a second successive monthly increase in backlogs of work. That said, the rate of accumulation was similar to that recorded in June and only slight.
Latest survey data pointed to the fastest rise in average cost burdens since last November in July. Companies partly passed on their higher cost burdens to clients by raising their output charges slightly over the month.”
Markit Economics, “HSBC China Manufacturing PMI – Jul 2014“, 1 Aug 2014 More
“The government has been putting a lot of emphasis on the targeted easing measures, tailoring to the small-medium enterprises. Growth seems to be stabilizing and the government would be able to focus more of its energy on the reform agenda in the second half of this year.”
Chang Jian, Chief China Economist, Barclays Plc (HK) More
Markit Eurozone Manufacturing PMI – Jul 2014
“July saw the Eurozone Manufacturing PMI hold steady at June’s seven-month low of 51.8, as the ongoing expansions in Germany and outside of the big-two economies were partly offset by a deeper downturn at French manufacturers.
The final seasonally adjusted Markit Eurozone Manufacturing PMI® has nonetheless signalled an improvement in operating conditions for 13 successive months. Ireland registered the sharpest rate of expansion in July followed by Spain, where the rate of growth stayed close to June’s seven- year record.
The Netherlands saw a modest acceleration in its rate of improvement, as did Germany and Austria, and the upturn in Italy continued despite the pace of expansion easing to an eight-month low. In contrast, France and Greece reported deeper contractions, the sharpest for seven and nine months respectively.
The performance disparity between Germany and France also widened, with the gap between the German and French PMI readings the greatest since February.
Eurozone manufacturers reported further growth of output, new orders and new exports. However, the rates of expansion all remained weaker than the highs seen at the start of the year.”
Markit Economics, “Eurozone Manufacturing PMI – Jul 2014“, 1 Aug 2014 More
Employment Situation (Unemployment Report) – Jul 2014
“Total nonfarm payroll employment increased by 209,000 in July, and the unemployment rate was little changed at 6.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, manufacturing, retail trade, and construction.
Household Survey Data
Both the unemployment rate (6.2 percent) and the number of unemployed persons (9.7 million) changed little in July. Over the past 12 months, the unemployment rate and the number of unemployed persons have declined by 1.1 percentage points and 1.7 million, respectively.
The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 3.2 million in July. These individuals accounted for 32.9 percent of the unemployed. Over the past 12 months, the number of long-term unemployed has declined by 1.1 million.
The civilian labor force participation rate, at 62.9 percent, changed little in July. The participation rate has been essentially unchanged since April. The employment-population ratio, at 59.0 percent, was unchanged over the month but has edged up by 0.3 percentage point over the past 12 months.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 7.5 million, was unchanged in July. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.
In July, 2.2 million persons were marginally attached to the labor force, down by 236,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, there were 741,000 discouraged workers in July, down by 247,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in July had not searched for work for reasons such as school attendance or family responsibilities.
Establishment Survey Data
Total nonfarm payroll employment increased by 209,000 in July, the same as its average monthly gain over the prior 12 months. In July, employment grew in professional and business services, manufacturing, retail trade, and construction.
Professional and business services added 47,000 jobs in July and has added 648,000 jobs over the past 12 months. In July, employment continued to trend up across much of the industry, including a gain of 9,000 jobs in architectural and engineering services. Employment in temporary help services changed little over the month.
Manufacturing added 28,000 jobs in July. Job gains occurred in motor vehicles and parts (+15,000) and in furniture and related products (+3,000). Over the prior 12 months, manufacturing had added an average of 12,000 jobs per month, primarily in durable goods industries.
In July, retail trade employment rose by 27,000. Employment continued to trend up in automobile dealers, food and beverage stores, and general merchandise stores. Over the past year, retail trade has added 298,000 jobs.
Employment in construction increased by 22,000 in July. Within the industry, employment continued to trend up in residential building and in residential specialty trade contractors. Over the year, construction has added 211,000 jobs.
Social assistance added 18,000 jobs over the month and 110,000 over the year. (The social assistance industry includes child day care and services for the elderly and persons with disabilities.) Employment in health care changed little over the month, with job gains in ambulatory health care services (+21,000) largely offset by losses in hospitals (-7,000) and nursing care facilities (-6,000).
Mining added 8,000 jobs in July, with the bulk of the increase occurring in support activities for mining (+6,000). Over the year, mining employment has risen by 46,000.
Employment in leisure and hospitality changed little in July but has added 375,000 jobs over the year, primarily in food services and drinking places.
Employment in other major industries, including wholesale trade, transportation and warehousing, information, financial activities, and government, showed little change in July.
In July, the average workweek for all employees on private nonfarm payrolls was 34.5 hours for the fifth straight month. The manufacturing workweek decreased by 0.2 hour in July to 40.9 hours, and factory overtime edged down by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.7 hours for the fifth consecutive month.
In July, average hourly earnings for all employees on private nonfarm payrolls edged up by 1 cent to $24.45. Over the past 12 months, average hourly earnings have risen by 2.0 percent. In July, average hourly earnings of private-sector production and nonsupervisory employees increased by 4 cents to $20.61.
The change in total nonfarm payroll employment for May was revised from +224,000 to +229,000, and the change for June was revised from +288,000 to +298,000. With these revisions, employment gains in May and June were 15,000 higher than previously reported.”
Bureau of Labor Statistics, “Employment Situation Summary – Jul 2014“, 1 Aug 2014 (08:30am) More
“It’s a goldilocks report for an economy that is steadily expanding but not lifting off. It will reinforce for now the Federal Reserve’s commitment to a gradualist policy approach.”
Mohamed El-Erian, Chief Economic Advisor, Allianz More
“You now have six straight months of greater-than-200,000 job gains. The labor force rose, and the labor force rises typically when people are feeling better about the backdrop.”
Tom Porcelli, Chief U.S. Economist,t RBC Capital Markets LLC More
“It still points to a job market and an economy that is improving, but we also have the absence of wage pressures building, which is becoming another concern for investors.”
Sean Lynch, Managing Director of Global Equity and Research Strategy, Wells Fargo Private Bank More
“It was in line (with expectations) and it didn’t give the market any reason to sell off any further. No new scare was given in terms of the wage component. It was enough for the moment to not make it worse for the market.”
Bill Schultz, Chief Investment Officer, McQueen, Ball & Associates ($1.2bn) More
Personal income and outlays – Jun 2014
“Personal income increased $56.7 billion, or 0.4 percent, and disposable personal income (DPI) increased $51.5 billion, or 0.4 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $51.7 billion, or 0.4 percent. In May, personal income increased $57.4 billion, or 0.4 percent, DPI increased $55.0 billion, or 0.4 percent, and PCE increased $39.8 billion, or 0.3 percent, based on revised estimates.
Real DPI increased 0.2 percent in June, the same increase as in May. Real PCE increased 0.2 percent in June, compared with an increase of 0.1 percent in May.”
Bureau of Economic Analysis, “Personal income and outlays – Jun 2014“, 1 Aug 2014 (08:30am) More
Markit US Manufacturing PMI – Jul 2014
“July data pointed to continued strong growth of production levels and incoming new business across the U.S. manufacturing sector, although the latest survey indicated some loss of momentum since the previous month. Employment growth also moderated during July, and was the weakest in the current 13- month period of workforce expansion. However, latest data signalled a robust rise in input buying and renewed efforts to boost pre-production inventories, which survey respondents attributed to sharp increases in overall new business volumes.
Adjusted for seasonal influences, the final Markit U.S. Manufacturing PMI registered 55.8 in July, down from a 49-month high of 57.3 in June. Although the latest reading was the lowest since April, the index remained well above the neutral 50.0 value and signalled a robust improvement in overall business conditions across the manufacturing sector.
Production volumes increased sharply in July, although the pace of expansion moderated after hitting its fastest for over four years in June. Higher levels of output were linked to improving domestic economic conditions and strong client demand.
In line with the trend for production, new business growth held close to its fastest for over four years, despite the pace of expansion slowing since June. Survey respondents mainly cited the launch of new products and greater spending among domestic clients. Meanwhile, latest data suggested that export sales continued to weigh on overall new business growth, with the latest rise only marginal and the slowest in the current six-month period of expansion.
Higher levels of new work contributed to a solid increase in outstanding business in July, although the rate of backlog accumulation slipped to a four- month low. Pressures on operating capacity contributed to another rise in payroll numbers. However, the latest increase in employment was the weakest for over a year, which some firms attributed to the non-replacement of voluntary leavers.
Meanwhile, input cost inflation eased for the first time since April and remained subdued in comparison to the average seen since the survey began. Factory gate charges nonetheless increased at a solid pace in July, with the latest rise the fastest seen in 2014 so far.”
Markit Economics, “Markit US Manufacturing PMI – Jul 2014“, 1 Aug 2014 (09:45am) More
ISM July 2014 Manufacturing
“The July PMI® registered 57.1 percent, an increase of 1.8 percentage points from June’s reading of 55.3 percent, indicating expansion in manufacturing for the 14th consecutive month. The New Orders Index registered 63.4 percent, an increase of 4.5 percentage points from the 58.9 percent reading in June, indicating growth in new orders for the 14th consecutive month. The Production Index registered 61.2 percent, 1.2 percentage points above the June reading of 60 percent. Employment grew for the 13th consecutive month, registering 58.2 percent, an increase of 5.4 percentage points over the June reading of 52.8 percent. Inventories of raw materials registered 48.5 percent, a decrease of 4.5 percentage points from the June reading of 53 percent, contracting after five months of consecutive growth. Comments from the panel are generally positive, while some indicate concern over global geopolitical situations.”
Institute for Supply Management, “July 2014 Manufacturing ISM® Report On Business® – PMI® at 57.1%“, 1 Aug 2014 (10:00am) More
Consumer confidence – Final – Jul 2014
“The Thomson Reuters/University of Michigan’s final July reading on the overall index on consumer sentiment came in at 81.8, a touch below the 82.0 estimate and down from the final June reading of 82.5.
The survey’s barometer of current economic conditions rose to 97.4 from 96.6, compared with a forecast of 97.1.
The survey’s gauge of consumer expectations fell for a third straight month, to 71.8 from 73.5. The subindex was slightly above an expected 71.5.
The survey’s one-year inflation expectation edged up to 3.3 percent from 3.1 percent, while the survey’s five-to-10-year inflation outlook was at 2.7 percent, down from the prior month’s 2.9 percent.”
Thomson Reuters-University of Michigan, “Consumer confidence – Final – Jul 2014“, 1 Aug 2014 More
Stock market indices
The stock market continued its fall today, with the S&P500 experiencing its worst fall since Jun 2012. The DJIA is 0.50% below its opening price for the year.
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The shape of the day
Market indices today (Chart: Yahoo Finance)
“Whether it’s the Portuguese bank, Argentina or continued unrest in the Middle East, these things are seemingly mattering more to investors now. All of a sudden, geopolitical things that didn’t matter a few weeks ago are starting to be more relevant concerns, and they’re serving as catalysts to sell. Investors are getting more risk-averse.”
Matt McCormick, Fund Manager, Bahl & Gaynor Inc. ($11bn) More
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USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)
Stock price movements
Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)
Portfolio stock prices
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Ai Group Australian PMI – Jul 2014
“The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) moved into positive territory this month, following eight months of contraction between November 2013 and June 2014. The index increased by 1.7 points, to 50.7 points (seasonally adjusted), indicating broadly stable conditions across the manufacturing sector. The three- month-moving-average also edged higher in July, to 49.6 points, indicating very mild contraction.
Many respondents to the Australian PMI® expressed renewed concern about the stronger Australian dollar, which has increased import competition and lowered demand and selling prices for locally made products again this month. Meanwhile, wages and input costs continued to grow, placing extra pressure on manufacturing businesses’ margins.
Across the eight manufacturing sub-sectors in the Australian PMI®, only the large food and beverages (51.7 points) and the smaller wood and paper products (67.2 points) sub-sectors expanded in July. The metal products, machinery and equipment, and petroleum, coal, chemicals and rubber products sub-sectors continued to contract (i.e. below 50 points).
Four of the five activity sub-indexes were above 50 points in July, but they were only pointing towards a stabilisation or very mild expansion in conditions at best. Both the stocks and sales sub-indexes remained in contraction this month (i.e. below 50 points). More positively for the outlook, the new orders sub-index of the Australian PMI® stayed above 50 points (i.e. expansion) for the third month in July. Conditions deteriorated for manufacturing exports, reflecting the ongoing strength in the Australian dollar, which currently sits at around US$0.94.”
Markit Economics, “Ai Group Australian PMI – Jul 2014“, 1 Aug 2014 More