Thu 1 Jun 2017


 NBR  Nightly Business Report.
 BTV   Bloomberg Technology: Market Report (Emily Chang).
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In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks rose to fresh records, the USD strengthened and Treasuries fell as a spike in private hiring data bolstered optimism in the economy before Friday’s jobs report. Markets largely ignored the U.S. withdrawal from the Paris climate pact.

The S&P 500 Index and the Dow Jones Industrial Average closed at all-time highs:

  • The S&P 500 rose 0.8% to a record 2,430 at 4 p.m. in New York.
  • The Nasdaq Composite and Nasdaq 100 indexes each advanced to fresh records.
  • The Russell 2000 Index jumped 1.9% after lagging behind other major equity gauges last month.
  • The small cap index climbed the most since 1 Mar 2017.

Banks rebounded from a selloff as the 10-year Treasury yield pushed higher, and a slew of data pointed to an economy of firm footing. With the Federal Reserve meeting in 2 weeks, eyes will turn Friday to the latest hiring report. At the same time, political intrigue in Washington remained a market theme, with former FBI Director James Comey slated to testify to lawmakers 8 Jun 2017, the same day as the U.K. election.

European equities halted a 5-day slide.
The Stoxx Europe 600 Index advanced 0.4%, after finishing May with a 0.8% increase.
MSCI’s emerging-market index rose 0.4% after climbing for a 5th straight month in May 2017.

The USD strengthened as companies added more workers to U.S. payrolls in May 2017 than forecast. West Texas oil erased gains in afternoon trading.Bloomberg

Market indices

:-) New record closes for the S&P500 (2,430.06), DJIA (21,144.18) and NASDAQ Composite (6,246.83) indices. Bears who followed “Sell in May and Go Away” would have been disappointed (so far).

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,430.06 +0.75% 2,238.83 +8.54%
DJIA INDU 21,144.18 +0.64% 19,762.60 +6.99%
NASDAQ IXIC 6,246.83 +0.77% 5,383.12 +16.04%

The portfolio today

USD and AUD denominated indices over the past 52 weeks (Chart: Bunting)
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting

Index values

Index Currency Today Change 31 Dec 16 YTD
USD-denominated Index USD 2.743 +0.24% 2.105 +30.35%
Valuation Rate USD/AUD 0.74254 -0.75% 0.72663 +2.18%
AUD-denominated Index AUD 3.695 +0.98% 2.895 +27.61%

Portfolio stock prices

:-) PayPal closed on a record high of $53.16, beating yesterday’s record of $52.21.
:-) Visa closed on a record high of $95.40, beating yesterday’s record of $95.23.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $988.29 +0.12% $792.45 +24.71%
Alphabet C GOOG $966.95 +0.22% $771.82 +25.28%
Apple AAPL $153.18 +0.27% $115.82 +32.25%
Amazon AMZN $995.95 +0.13% $749.87 +32.81%
Ebay EBAY $34.79 +1.43% $29.69 +17.17%
Facebook FB $151.53 +0.05% $115.05 +31.70%
PayPal PYPL $53.16 +1.82% $39.47 +34.68%
Twitter TWTR $18.53 +1.26% $16.30 +13.68%
Visa V $95.40 +0.19% $78.02 +22.27%
VMware VMW $97.40 +0.26% $78.73 +23.71%

FX: USD/AUD

USD

DXY movements
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg

The Bloomberg Dollar Spot Index (DXY) rose 0.2%, following a 1.5% decline in May 2017 for the biggest monthly drop since Jan 2017. It would be the first gain of the week, bolstered by the ADP payrolls survey.
Britain’s GBP fell 0.1% to USD 1.2883.
The EUR weakened 0.3% to USD 1.1216.
The JPY slipped 0.6% to 111.396 per USD, after gaining in the month of May 2017.
Bloomberg

AUD

AUD movements
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com

Oil and Gas Futures

Futures prices

West Texas Intermediate crude oil fell 0.4% to $48.15 to a two-week low. Crude initially rose above $49/barrel after government data showed a drop in inventories. Crude fell 2.7% in the previous session.Bloomberg

Prices are as at 15:47 ET

  • NYMEX West Texas Intermediate (WTI): $48.09/barrel -0.48% Chart
  • ICE (London) Brent North Sea Crude: $50.40/barrel -0.71% Chart
  • NYMEX Natural gas futures: $3.03/MMBTU -1.40% Chart

flag_australia AU: CoreLogic Housing Price Index. May 2017

Press Comment: Bloomberg

Australian house prices fell in May 2017 for the first time in 17 months, in an early sign lending restrictions are starting to damp demand. Home values in Australia’s state and territory capitals fell 1.1% last month from Apr 2017, according to CoreLogic Inc. data released Thursday. Still, prices across the combined capitals were 8.3% higher than a year ago.

The monthly decline comes after regulators tightened lending curbs amid fears of a housing bubble, and the nation’s banks raised interest rates – especially for interest-only loans which are popular with property investors seeking to take advantage of tax breaks.

“The market has lost momentum, particularly in Sydney and Melbourne where affordability constraints are more evident and investors have comprised a larger proportion of housing demand,” CoreLogic’s head of research Tim Lawless said. Lawless said he expects investor demand for property to slow, but not stall as potential returns from other investments such as cash and bonds remain low. Australia’s record low interest rates have been a key factor in driving demand for buy-to-let properties.

Citigroup Inc. chief economist Willem Buiter yesterday said Australia is experiencing a “spectacular housing bubble” which needs to be addressed with tougher regulatory measures. “It had better be focused on immediately, to try and tether a soft housing landing,” Buiter said. “Clearly if these things are not managed well they can be a trigger for a cyclical downturn.”

The monthly drop was led by declines of 1.3% in Sydney and 1.7% in Melbourne, the two cities where prices have risen the fastest. In Sydney, prices have gained 75% in the past 5 years, ranking it behind only Hong Kong as the world’s least affordable housing market.Bloomberg

Press Release Extract [ser_corelogic]

The CoreLogic May Home Value Index results out today confirmed that the capital gains trend has slowed over recent months with dwelling values edging 0.4% higher over the three months ending May 2017.

au_houseprices_20170601

According to CoreLogic Head of Research Tim Lawless, Australia’s capital cities saw a cooling of housing market conditions over the seasonally weak month of May with the CoreLogic hedonic home value index reporting a -1.1% fall in dwelling values across the combined capitals. The month-on-month fall was largely the result of declines in Sydney and Melbourne, where dwelling values have recorded significant gains over the current growth cycle to date.

Corelogic, “Multiple Indicators Point To Softer Housing Market Conditions“, 1 Jun 2017 More

flag_australia AU: AiGroup Performance of Manufacturing Index. May 2017

Press Release Extract [ser_76]

Key Findings

  • The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) stayed in expansionary territory at 54.8 points in May, but it eased by 4.4 points and indicated a slower rate of growth (results above 50 indicate expansion with the distance from 50 points indicating the strength of expansion). This was the eighth month of expansion for the Australian PMI®. The last six months have averaged 56.2 points.
  • All seven activity sub-indexes in the Australian PMI® expanded in May albeit at a slower pace than in April. New orders remained elevated (58.1 points), suggesting the current expansion has some way to run. Employment (54.2 points), deliveries (55.8 points) and sales (54.4 points) remained relatively strong. Exports (52.0 points) slowed but remained expansionary, as did production (52.2 points) and stocks (50.9 points).
  • Seven out of eight sub-sectors in the Australian PMI® expanded in May, the same as in April (trend data). Expansions continued across all sub-sectors except textiles, clothing and other manufacturing (39.4 points). The recovery in wood & paper products strengthened (65.3 points) as did printing & recorded media (62.5 points), petroleum, coal & chemical products (56.7 points) and metal products (60.9 points). Other sub-sectors kept expanding but at a slower pace, including food & beverages (56.8 points), non-metallic mineral products (62.1 points) and machinery & equipment (58.9 points).
  • Manufacturers reported slower conditions than previous months, although demand is still relatively elevated. Exports are a key source of growth with many manufacturers strongly focussed on export markets. Less positively, others are feeling the impacts of the exiting auto industry more acutely. Strong overseas competition remains evident and the Federal Budget has caused some unease. Slower retail conditions are also having some negative impacts for manufacturers, while slow capital expenditure by business is limiting demand for others. Elevated input costs are an ongoing challenge, particularly for raw materials and energy costs. Specialised labour shortages are posing challenges for some manufacturers.

au_pmi_20170601

Activity Sub-Indices

  • The production sub-index fell 8.5 points to 52.2 points in May. This sub-index remains expansionary but has come off the high levels evident over the past three months.
  • The new orders sub-index remained high at 58.1 points. Although easing by 3.4 points in May, this index continues to indicate good growth prospects for manufacturing.
  • The sales sub-index declined 11.1 points from a very high point in April to reach 54.4 points in May. This was the fourth month of expansion for this sub-index.
  • The exports sub-index fell to 52.0 points in May from very a high level in April (58.6 point). Exports remain a key source of growth for manufacturers. Metals and commodities prices eased recently and this has likely reduced metal goods export values.
  • The employment sub-index eased by 1.7 points to 54.2 points in May but remained expansionary. This is consistent with ABS estimates showing 39,900 jobs returned to manufacturing in the year to February 2017, an increase of 4.6% over the year (trend).
  • The deliveries sub-index fell by 6.5 points but remained expansionary at 55.8 points.
  • The stocks sub-index (inventories) was stable at 50.9 points (down 0.3 points) in May.
  • Capacity utilisation rose by 1.5 percentage points May to 78.9% of available capacity.

Wages and Prices Sub-Indices

  • The input prices sub-index decreased by 6.0 points in May to 63.8 points. Input prices have been elevated over the past six months, with this sub-index averaging 65.9 points.
  • The wages sub-index increased by 3.0 points to an elevated 61.4 points in May.
  • The manufacturing selling price sub-index decreased 2.7 points in May, but remains stronger than in recent years at 56.2 points. This marks the fifth month of expansion for selling prices. It may indicate some relief to manufacturers in being able to pass on more of their cost increases. This may also point to more inflationary conditions (triggered, for example, by higher input prices and especially energy prices), with consumer inflation and producer prices showing some recovery in price growth in the March quarter (ABS data).

Australian Industry Group, “AiGroup Performance of Manufacturing Index. May 2017“, 29 May 2017 More

flag_australia AU: Retail Sales. Apr 2017

Press Release Extract [ser_72]

Australian retail turnover rose 1.0 per cent in April 2017, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) Retail Trade figures. This follows a fall of 0.2 per cent in March 2017.

In seasonally adjusted terms, there were rises in food retailing (1.2 per cent), cafes, restaurants and takeaway food services (1.1 per cent), department stores (2.5 per cent), other retailing (0.6 per cent), household goods retailing (0.4 per cent) and clothing, footwear and personal accessory retailing (0.3 per cent).

In seasonally adjusted terms there were rises in all states and territories. Queensland (2.4 per cent) led the rise, and there were also rises in Victoria (1.0 per cent), South Australia (1.1 per cent), Western Australia (0.4 per cent), New South Wales (0.1 per cent), Tasmania (1.2 per cent), the Northern Territory (1.8 per cent) and the Australian Capital Territory (0.9 per cent) in April 2017.

The trend estimate for Australian retail turnover rose 0.1 per cent in April 2017 following a 0.1 per cent rise in March 2017. Compared to April 2016 the trend estimate rose 2.7 per cent.

Online retail turnover contributed 3.4 per cent to total retail turnover in original terms.

Australian Bureau of Statistics (ABS), “8501.0 – Retail Trade, Australia, Apr 2017“, 1 Jun 2017 More

flag_australia AU: Private New Capital Expenditure and Expected Expenditure. Mar 2017

Press Release Extract [ser_capex]

Total Capital Expenditure

The trend estimate for total new capital expenditure fell 0.6% in the March quarter 2017. By asset type, the trend estimate for buildings and structures fell 0.2% and equipment, plant and machinery fell 1.0%. The seasonally adjusted estimate for total new capital expenditure rose 0.3% in the March quarter 2017.

Buildings and Structures

The trend estimate for buildings and structures fell 0.2% in the March quarter 2017. Buildings and structures for Mining fell 2.5%, Other Selected Industries rose 1.5% and Manufacturing rose 10.6%. The seasonally adjusted estimate for buildings and structures rose 0.7% in the March quarter 2017. Mining rose 0.6%, Other Selected Industries fell 1.1% and Manufacturing rose 24.6% in seasonally adjusted terms.

Equipment, Plant and Machinery

The trend estimate for equipment, plant and machinery fell 1.0% in the March quarter 2017. Equipment, plant and machinery for Mining rose 2.0%, Manufacturing fell 0.2% and Other Selected Industries fell 1.4%. The seasonally adjusted estimate for equipment, plant and machinery fell 0.1% in the March quarter 2017. Mining fell 1.3%, Manufacturing rose 0.4%, and Other Selected Industries fell 0.02% in seasonally adjusted terms.

Mining

The trend estimate for Mining fell 2.1% in the March quarter 2017. Buildings and structures fell 2.5% and equipment, plant and machinery rose 2.0%. The seasonally adjusted estimate for Mining rose 0.4%. Buildings and structures rose 0.6% and equipment, plant and machinery fell 1.3% in seasonally adjusted terms.

Manufacturing

The trend estimate for Manufacturing rose 2.5% in the March quarter 2017. Equipment, plant and machinery fell 0.2% and buildings and structures rose 10.6%. The seasonally adjusted estimate for Manufacturing rose 6.6% in the March quarter 2017. Buildings and structures rose 24.6% and equipment, plant and machinery rose 0.4% in seasonally adjusted terms.

Other Selected Industries

The trend estimate for Other Selected industries fell 0.1% in the March quarter 2017. Buildings and structures rose 1.5% and equipment, plant and machinery fell 1.4%. The seasonally adjusted estimate for Other Selected Industries fell 0.5% in the March quarter 2017. Buildings and structures fell 1.1% and equipment, plant and machinery fell 0.02% in seasonally adjusted terms.

Australian Bureau of Statistics (ABS), “5625.0 – Private New Capital Expenditure and Expected Expenditure, Australia, Mar 2017“, 1 Jun 2017 More

flag_europe EU: Eurozone Manufacturing PMI. May 2017

Press Release Extract [ser_64]

Key findings:

  • Final Eurozone Manufacturing PMI at 57.0 in May (Flash: 57.0, April Final: 56.7)
  • Strong growth of production and new business support survey-record job creation
  • Germany stays atop the PMI growth rankings with fastest gains in output, new orders and jobs.

eu_pmi_20170601

The ongoing expansion of the eurozone manufacturing sector gathered further momentum in May. Growth in output and new orders accelerated to the best seen for around six years, to underpin the strongest job creation in the 20-year survey history.

The final IHS Markit Eurozone Manufacturing PMI® rose to a 73-month high of 57.0 in May, up from 56.7 in April and unchanged from the earlier flash estimate. The PMI has signalled expansion in each of the past 47 months.

Improved business conditions were signalled in seven out of the eight nations covered by the survey. The growth acceleration was mainly driven by a stronger expansion in Germany, where the rate of increase was the fastest in over six years.

This placed Germany atop the PMI growth rankings for the third successive month. Austria and the Netherlands also saw rates of manufacturing expansion above the euro area average, despite seeing growth slow slightly over the month. Accelerations were registered in Ireland and Spain, and mild decelerations in France and Italy.

Greece was the only monitored country to signal contraction in May. However, the rate of decline was only moderate and the weakest during the current nine-month sequence of deterioration.

Eurozone manufacturing production rose at the fastest pace since April 2011, underpinned by the strongest growth of new work in 74 months. This led to survey-record job creation, with employment rising in all of the nations covered for the first time since last November.

Staffing levels rose at quicker rates in Germany (six- year high), Italy (just below October 1999’s series- record), Spain (fastest in 19 years), Ireland (two-year peak) and Austria (two-month high). Slower increases were registered in France and the Netherlands, while Greece reported jobs growth for the first time in six months.

Companies reported improved inflows of new business from both domestic and export markets, with the rate of expansion in new export orders* hitting a 73-month record. Levels of new export business improved in almost all of the nations covered, the sole exception being Greece. The standout performer was Germany, where the rate of expansion rose to a seven-year high.

The improved performance of the eurozone manufacturing sector and expectations of brighter conditions in future led companies to forecast increased production in one year’s time. Business optimism remained close to January’s series-record high despite easing to a five-month low.

The latest survey data pointed to continued pressure on capacity during May. Backlogs of work at manufacturers rose for the twenty-fifth successive month, with the rate of accumulation the highest since April 2011. Supplier capacity was also under strain, as highlighted by the steepest lengthening in vendor lead times for over six years.

These supply chain factors also contributed to a further increase in average input costs in May, continuing the trend towards a sellers’ market developing for many items. However, there were signs that price inflationary pressures were easing from recent highs, as highlighted by slower rates of increase in both input costs (six-month low) and output charges (four-month low).

Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘The eurozone upturn is developing deeper roots as factories enjoy a spring growth spurt. Demand for goods is growing at the steepest rate for six years, encouraging manufacturers to step up production and take on extra staff at a rate not previously seen in the two-decade history of the PMI survey.

‘The fact that the upturn is being accompanied by such strong jobs growth sends a signal that increasing numbers of companies are moving away from a focus on cost cutting towards investing in expansion, underscoring the elevated levels of business optimism seen across the region. The record hiring adds to the sense that the upturn is looking more and more robust as each month goes by.

‘Germany is leading the upturn but is by no means the only engine of growth. Solid upturns are being recorded in other countries such as the Netherlands, Austria, Spain, Italy and Ireland. While France is lagging behind, it is nonetheless enjoying its best quarter for six years.

‘The marked easing of input cost inflation during May will meanwhile be welcome news to policymakers eager to see signs that the recent uplift in consumer price inflation will prove short- lived.’

IHS Markit, “Eurozone Manufacturing PMI. May 2017“, 1 Jun 2017 More

flag_usa US: ADP National Employment Report. May 2017

Press Release Extract [ser_95]

Private sector employment increased by 253,000 jobs from April to May according to the May ADP National Employment Report®.

us_adp_20170601

“May proved to be a very strong month for job growth. Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

“Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses’ number one challenge will be a shortage of labor,” said Mark Zandi, chief economist of Moody’s Analytics.

ADP Research Institute, “ADP National Employment Report. Apr 2017“, 1 Jun 2017 (08:15) More

flag_usa USA: Unemployment Insurance Weekly Claims Report

Press Release Extract [ser_4]

insurance

In the week ending May 27, the advance figure for seasonally adjusted initial claims was 248,000, an increase of 13,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 234,000 to 235,000. The 4-week moving average was 238,000, an increase of 2,500 from the previous week’s revised average. The previous week’s average was revised up by 250 from 235,250 to 235,500.

unemployment

The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week ending May 20, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending May 20 was 1,915,000, a decrease of 9,000 from the previous week’s revised level. The previous week’s level was revised up 1,000 from 1,923,000 to 1,924,000. The 4-week moving average was 1,914,500, a decrease of 16,000 from the previous week’s revised average. This is the lowest level for this average since January 12, 1974 when it was 1,881,000. The previous week’s average was revised up by 250 from 1,930,250 to 1,930,500.

Employment and Training Administration, “Unemployment Insurance Weekly Claims Report“, 1 Jun 2017 (08:30) More

flag_usa US: Manufacturing PMI. May 2017

Press Release Extract [ser_66]

Key findings:

  • Moderate improvement in overall business conditions
  • New orders rise at slowest pace since September 2016
  • Input cost inflation eases to six-month low.

U.S. manufacturing companies indicated an upturn in business conditions during May, but the latest survey revealed a further loss of momentum from the peak seen at the beginning of 2017. The softer overall improvement in manufacturing conditions reflected a moderation in new business growth to its weakest for eight months, alongside relatively subdued increases in output and employment. May data also pointed to more cautious inventory policies, with stocks of purchases falling at the fastest pace since August 2016.

At 52.7 in May, down fractionally from 52.8 in April, the seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ IndexTM (PMITM) was above the 50.0 no-change value, but signalled the weakest improvement in business conditions since last September. The latest reading pointed to a further growth slowdown from the 22- month high recorded in January (55.0). Weaker new business growth and softer job creation helped to offset a marginally stronger upturn in production volumes.

May data indicated that manufacturing output increased for the twelfth month running. The rate of expansion picked up slightly from April’s seven- month low, but remained relatively modest overall. Survey respondents noted that subdued new business growth and more cautious inventory policies had acted as a brake on production requirements. Reflecting this, stocks of finished goods were accumulated at a slower pace than seen at the start of 2017. Meanwhile, pre- production inventories dropped for the second month running, which contrasted with robust rates of stock building earlier this year.

New order levels increased again in May, although the rate of expansion was the least marked recorded since September 2016. This was mainly linked to subdued client demand. Some manufacturers also cited weak export sales, as highlighted by a slower upturn in new work from abroad than that seen in April.

The latest survey pointed to a decline in backlogs of work for the first time since May 2016. Manufacturing firms noted that sustained staff hiring had helped to alleviate capacity pressures. Payroll numbers increased at a modest pace in May, although the latest rise was much softer than the 18-month peak seen in December 2016. Survey respondents noted that resilient business confidence and optimism about the general economic outlook had helped to underpin staff recruitment in May.

Meanwhile, input price inflation eased sharply from April’s two-and-a-half year peak. Moreover, the latest rise in average cost burdens was the slowest for six months. Receding cost pressures and intense competition for new work led to a slower pace of factory gate price inflation in May.

Commenting on the final PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

‘Manufacturing growth momentum continued to ebb in May, down to its weakest since just before the presidential election.

‘Manufacturing output, order books and employment all grew at only modest rates as sluggish sales prompted firms to scale back hiring. Exports sales remained especially lacklustre, hampered in part by the relatively strong dollar. The survey also brought signs of companies becoming more cautious about holding inventory.

‘Factories’ raw material prices meanwhile rose at a sharply reduced rate, which should at least help take pressure off profit margins and also feed through to weaker pressure on consumer price inflation.’

IHS Markit, “U.S. Manufacturing PMI™ – final data“, 1 Jun 2017 (09:45) More

flag_usa US: Manufacturing ISM Report on Business. May 2017

Press Release Extract [ser_99]

Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 96th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

  • The May PMI® registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent.
  • The New Orders Index registered 59.5 percent, an increase of 2 percentage points from the April reading of 57.5 percent.
  • The Production Index registered 57.1 percent, a 1.5 percentage points decrease compared to the April reading of 58.6 percent.
  • The Employment Index registered 53.5 percent, an increase of 1.5 percentage points from the April reading of 52 percent.
  • The Inventories Index registered 51.5 percent, an increase of 0.5 percentage point from the April reading of 51 percent.
  • The Prices Index registered 60.5 percent in May, a decrease of 8 percentage points from the April reading of 68.5 percent, indicating higher raw materials prices for the 15th consecutive month, but at a noticeably slower rate of increase in May compared with April.

Comments from the panel generally reflect stable to growing business conditions, with new orders, employment and inventories of raw materials all growing in May compared to April. The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain.

Institute for Supply Management, “ISM Manufacturing Report on Business. Apr 2017“, 1 May 2017 (10:00) More

Global: JP Morgan Manufacturing PMI. May 2017

Press Release Extract [ser_67]

The rate of expansion in the global manufacturing sector eased to a six-month low in May. This was signalled by the J.P.Morgan Global Manufacturing PMI™ – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posting 52.6, down slightly from 52.7 in April, but still above the long-run series average of 51.4.

global_pmi_20170601

Developed nations again tended to outperform emerging markets in May. Growth across emerging nations slowed to a pace only marginally above the stagnation mark. The Developed Markets PMI continued to signal solid and steady expansion.

Among the largest nations covered by the survey, the US PMI slipped to an eight-month low and the China PMI dipped below the critical 50.0 no-change mark for the first time in 11 months. The UK PMI remained close to April’s three-year high. Rates of improvement strengthened in the euro area (six-year high) and Japan (three-month high).

Worldwide manufacturing production rose for the fifty-fifth successive month in May, underpinned by a solid increase in new work received. However, the rate of expansion in output moderated further to its weakest since last November. Growth of new business steadied at April’s five-month low.

The upturn remained broad-based by sub-sector. Similar rates of output expansion were seen across consumer, intermediate and investment goods producers. There was greater variation between the trends in new orders. The investment goods sector saw the strongest increase, with the pace of expansion the second-fastest in almost three years. Growth also accelerated at intermediate goods producers, but eased to an 11-month low for consumer goods.

Companies maintained a positive one-year ahead outlook for production volumes in May. Meanwhile, rising levels of work-in-hand suggested current capacity was still being tested.

The combination of higher order intakes, an optimistic outlook and rising backlogs creation in May. Employment rose for the ninth month in a row and at a pace above the average for that sequence.

Price pressures continued to ease in May. This was highlighted by the rates of increase in both input costs and output charges easing to eight-month lows. Both price measures also tended to signal sharper increases for developed nations (on average) than in emerging markets.

Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

‘The global manufacturing sector continued to expand in May, achieving further steady growth. The underlying dynamics of the survey, such as fuller order books, rising employment and positive business sentiment, also bode well for the future performance of manufacturing.’

J.P.Morgan and IHS Markit in association with ISM and IFPSM, “J.P.Morgan Global Manufacturing PMI™“, 1 Jun 2017 More

flag_japan Japan update

Nikkei Japan Manufacturing PMI. May 2017

Press Release Extract [ser_68]

Key points:

  • Both output and new orders rise at stronger rates
  • Optimism regarding future output retained
  • Input price inflation eases to four-month low

jp_pmi_20170601

Operating conditions in Japan’s manufacturing sector improved to the greatest extent for three months during May, underpinned by faster rises in volumes of output and new orders. Faced with rising production requirements, companies also took on extra staff as business optimism remained high.

Purchasing activity also increased, placing pressure on vendors amid reports of stock shortages. Input costs also continued to rise, albeit to a lesser degree, while output charges were increased only marginally.

The headline Japan Manufacturing Purchasing Managers’ Index™ (PMI)™ – a composite single- figure indicator of manufacturing performance – recorded a level of 53.1 in May. That was up from April’s 52.7 and above the 50.0 no-change mark for a ninth successive month. The rate of growth was the sharpest for three months and only fractionally lower than February’s near three-year high.

The general improvement in operating conditions was closely linked to accelerated rises in both manufacturing output and new orders. Production has now increased for ten months in succession, while new orders rose for the eighth successive survey period. In both instances, rates of expansion were the best since February with companies commenting that growth was underpinned by firmer demand from both at home and abroad. New export orders rose at a solid pace that was only marginally down since April.

In line with recent trends, the fastest increases in output and total new orders were again found in the capital goods sector. This category also registered the strongest growth in employment over the month. Latest data showed that overall staffing levels continued to rise, meaning growth has now been recorded continuously since last September.

Panellists commented that jobs were being added in line with rising production requirements.

Higher output also meant that purchasing activity continued to rise, which also helped to bolster input inventories. The rate of expansion was the highest in 16 months as some companies prepared for higher orders and output in the coming months. May’s survey showed that manufacturers retained a high degree of confidence regarding future output, with nearly 30% of respondents forecasting growth from present levels. Positive forecasts for demand and preparations for the 2020 Olympics Games are expected to bolster activity.

Meanwhile, input costs continued to rise in May, albeit to a lesser extent than in April when inflation reached a 28-month peak. Where input prices increased, inflation was linked to higher prices for metals, especially aluminium and steel. Intermediate and investment goods producers recorded particularly noticeable rises in input costs.

Despite ongoing inflation of input prices, companies recorded only a slight increase in their own output charges. Nonetheless, inflation of output charges has now been recorded for five months in succession, the longest such run since a similar sequence ended in January 2015.

Commenting on the Japanese Manufacturing PMI survey data, Paul Smith, senior economist at IHS Markit, which compiles the survey, said:

‘Following the slightly underwhelming ‘flash’ PMI data, the final figures showed a broadly sideways movement in growth during May. Consistent with an underlying rise of around 2%, the industrial sector is subsequently set to make a positive contribution to national output for Q2. As clients continue to demand high-value investment products, detailed data showed that the capital goods sector remained a key driver of growth, registering the strongest rises in output, new orders and employment over the month.’

IHS Markit, “Nikkei Japan Manufacturing PMI™. May 2017 “, 1 Jun 2017 More

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flag_china China update

Caixin General Manufacturing PMI™

Press Release Extract [ser_65]

Key Points:

  • Production and new orders both rise only slightly
  • Employment declines at quickest pace since September 2016
  • Renewed falls in both input prices and output charges

cn_pmi_20170601

Operating conditions faced by Chinese goods producers deteriorated for the first time in nearly a year in May. The fall in the headline index coincided with slower increases in output and new orders, while staff numbers were cut at a quicker rate. Subdued demand conditions underpinned a renewed fall in purchasing activity, albeit only slight, and the first increase in inventories of finished items in 2017 so far.

Latest data also signalled the first fall in input costs since last June, which in turn led manufacturers to lower their selling prices for the first time since February 2016.

The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted below the neutral 50.0 value at 49.6 in May. Although only indicative of a marginal deterioration in operating conditions, the index fell from 50.3 to signal the first decline in the health of the sector for 11 months.

Chinese manufacturers reported a further rise in production during May. That said, the pace of expansion was the weakest in the current 11- month sequence and only slight. Softer growth in output reflected a relatively muted increase in total new orders during May. Furthermore, growth in new order books was also the slowest seen since the current upturn began in July 2016. Data indicated that customer demand was relatively subdued both at home and overseas, with new export sales rising at a similarly marginal pace.

Confidence towards the year-ahead meanwhile remained weaker than the historical average, with the degree of optimism unchanged from April’s four-month low.

At the same time, employment continued on a downward trend, with the rate of job shedding picking up slightly for the third month running. Notably, it was the quickest decline in workforce numbers seen since last September. Lower staffing levels were partly linked to company down-sizing initiatives, but also the non-replacement of voluntary leavers. As a result, outstanding business increased again in May and at the fastest pace this year so far.

Goods producers in China lowered their purchasing activity for the first time in 11 months in May, albeit only slightly. A number of panellists mentioned that weaker than expected sales had weighed on input buying. As a result, stocks of inputs declined and at the quickest pace since January. Subdued sales also contributed to a renewed increase in inventories of finished items.

Although purchasing activity fell in May, average delivery times continued to lengthen. A number of panellists blamed longer lead times on stock shortages at vendors.

Manufacturing companies reported the first decline in average cost burdens for nearly a year in May. The rate of reduction was marginal overall, and widely linked by respondents to lower raw material prices. Firms generally passed on any savings to clients, by cutting their output charges for the first time since February 2016.

Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

‘The Caixin China General Manufacturing PMI fell 0.7 points to 49.6 in May, marking its first contraction in 11 months. The sub- indices of output and new business stayed in expansionary territory, but both fell to their lowest levels since June last year. The sub- indices of input costs and output prices dropped into contractionary territory for the first time since June 2016 and February 2016 respectively. The sub-index of stocks of purchases signalled a renewed decline, while the sub-index of stocks of finished goods rebounded, indicating that companies have stopped actively restocking as inventories began to stack up. China’s manufacturing sector has come under greater pressure in May and the economy is clearly on a downward trajectory.’

IHS Markit, “Caixin China General Manufacturing PMI™. May 2017“, 1 Jun 2017 More

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