Mon 5 Jun 2016


 NBR  Nightly Business Report.
 BTV   Bloomberg Technology.
AAPL Recode: WWDC2017 – Apple’s Latest Product Releases and Updates to Existing Products and Services

In Portfolioticker today

Today at the stock market

bull/bearU.S. stocks slipped from all-time highs, while the USD slumped with crude as a caution prevailed at the start of a week full of events that could set the tone on financial markets. The S&P 500 Index swung between gains and losses before closing lower as gains in banks failed to offset weakness in defensive shares.

  • The S&P 500 fell 0.1% to 2,436.21 at 4 p.m. in New York, falling from a record set Friday. Utility and materials shares led losses.
  • The Dow Jones Industrial Average and Nasdaq Composite Index also slipped from all-time highs. Apple Inc. lost 1% after unveiling new products and software.
  • The Stoxx Europe 600 Index declined 0.1% with basic resources producers down 0.6%.
  • MSCI’s emerging-market index added 0.2%. The measure is higher by 18% in 2017.

Miners weighed on European equities, as zinc and tin led base metals lower. Some European markets were closed for a public holiday. Mexico’s peso traded at the strongest level in seven months. Oil erased gains sparked by a political spat between several energy-producing nations in the Middle East.

Markets showed little reaction to the diplomatic tensions in the Middle East and the latest terror attack in London, though a slew of events lie ahead, including the U.K. vote Thursday. The European Central Bank also meets this week and former FBI head James Comey will testify to Congress. The key for the assets may be how investors gauge the strength of global economic growth and its ability to withstand rising borrowing costs or an end to the era of easy central bank cash. Bloomberg

Market indices

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,436.10 -0.13% 2,238.83 +8.81%
DJIA INDU 21,184.04 -0.11% 19,762.60 +7.19%
NASDAQ IXIC 6,295.68 -0.17% 5,383.12 +16.95%

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 2.763 -0.55% 2.105 +31.27%
Valuation Rate USD/AUD 0.75356 +0.62% 0.72663 +3.70%
AUD-denominated Index AUD 3.667 -1.16% 2.895 +26.66%

Portfolio stock prices

:-) Alphabet closed on a record high of $1,987.56 beating the record of $1,972.05 set on 30 May 2017:

  • Class A shares (GOOGL) closed at $1,003.88 beating the record of $996.17 set on 30 May 2017.
    This is the first time GOOGL has closed above $1,000.
  • Class C shares (GOOG) closed at $983.68 beating the record of $975.88 set on 30 May 2017

:-) Amazon closed on a record high of $1,011.34, beating the record of $1,006.73 set on 2 Jun 2017.
:-) Ebay closed on a record high of $35.55, beating the record of $35.32 set on 2 Jun 2017.
:-) Facebook closed on a record high of $153.63, beating the record of $153.61 set on 2 Jun 2017.
:-) PayPal closed on a record high of $53.80, beating the record of $53.52 set on 2 Jun 2017.
:-) Visa closed on a record high of $96.55, beating the record of $96.15 set on 2 Jun 2017.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $1003.88 +0.78% $792.45 +26.68%
Alphabet C GOOG $983.68 +0.83% $771.82 +27.44%
Apple AAPL $153.93 -0.98% $115.82 +32.90%
Amazon AMZN $1011.34 +0.46% $749.87 +34.86%
Ebay EBAY $35.55 +0.65% $29.69 +19.73%
Facebook FB $153.63 +0.01% $115.05 +33.53%
PayPal PYPL $53.80 +0.52% $39.47 +36.30%
Twitter TWTR $18.23 -0.44% $16.30 +11.84%
Visa V $96.55 +0.42% $78.02 +23.75%
VMware VMW $91.90 -3.63% $78.73 +16.72%

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) dropped 0.2%, adding to a 0.4% decline on Friday.
Japan’s JPY fell 0.1% to 110.485/USD. Japan’s currency climbed 0.9% Friday after the U.S. data.
Mexico’s MXP jumped 1.9%. President Enrique Pena Nieto’s party forged ahead in the election for governor of Mexico’s largest state.
Britain’s GBP climbed 0.2% after erasing an earlier loss.
The EUR fell 0.2% to $1.1256.
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 declined 0.6% to settle at $47.40/barrel in New York, after dropping 1.5% on Friday. The Monday settlement was the lowest in more than 3 weeks.Bloomberg

Prices are as at 15:47 ET

  • NYMEX West Texas Intermediate (WTI): $47.38/barrel -0.59% Chart
  • ICE (London) Brent North Sea Crude: $49.47/barrel -0.96% Chart
  • NYMEX Natural gas futures: $2.98/MMBTU -0.60% Chart

Apple’s New Product Releases

Apple Inc. took the wraps off new iOS 11, the operating system that will power the next iPhone as well as current and some past iPhone models, previewing new augmented reality features and a redesigned App Store at the company’s annual developers conference.

Updates to the software running Macs, Apple TVs, and Apple Watches were also unveiled, along with more integration of the company’s Siri digital assistant.

Apple has become the world’s most valuable public company by designing phones and other devices that work seamlessly with software. It puts on a Worldwide Developers Conference each year to show outside developers the latest software so they can create new apps and services that make the company’s gadgets more useful.

This year’s WWDC also included new versions of Mac laptops and iPads. But developers, consumers and investors are most excited by the new iPhone, expected later this year. Apple’s tweaks and additions to the iOS 11 operating system that will be running the phone give clues on how the device will turn out. The iPhone still contributes more than 60% of Apple revenue.

On Monday, iOS 11 upgrades focused on augmented reality, with a new service called ARKit that helps outside developers integrate this technology into their apps. On stage, Apple software executive Craig Federighi used an iPhone’s camera to project a 3-D rendering of a living room onto a big screen.

Phil Schiller, Apple’s marketing chief, announced a redesigned App Store, getting huge applause from the developers in the crowd. There’s a new “Today” view to show new apps, a space to show off new games, a new tab for non-gaming applications. Each app will also get its own page that developers can customize.

For the Apple Watch, the company introduced new health and music features, plus new watch faces, including one that uses Siri to display pertinent information, like appointments, across the day. Refreshed Apple TV software added Amazon.com Inc.’s Prime Video service as an app.

Apple previewed new features for Mac laptops and desktops, including a new photo managing and editing app, and a new file system that should speed up the devices and improve privacy. The Safari web browser was also updated to block auto-play videos and limit targeting of ads.Bloomberg

New Product: HomePod

Apple Inc. entered the growing field of voice-controlled speakers for the home on Monday, taking on early leaders Amazon.com Inc. and Google. Apple’s speaker, called HomePod, emphasizes the enjoyment of music and looks like a wide can with curved edges. Unlike Amazon’s new Echo Show, Apple’s device does not have a screen. It will allow users to talk to Siri, Apple’s digital assistant, while at home and costs $349 — almost double the price of most competing products.

HomePod is Apple’s first major new hardware product since the Apple Watch’s release in 2015, and it comes at an important time for the company. The Cupertino, California-based technology giant is seeking new revenue streams after becoming heavily reliant on the success of the iPhone.

The market for internet-connected speakers and other smart home technology may be big enough to help Apple diversify. Shipments of intelligent home speakers surged nearly 600% year-over-year to 4.2 million units in the fourth quarter, with Amazon taking about 88% share and Google 10%, according to consultant Strategy Analytics. Spending on smart home related hardware, services and installation fees will reach $155 billion by 2022, up from almost $90 billion this year, with devices accounting for about half of that, the consulting firm also estimates.Bloomberg

Upgrades to Existing Product Categories

Apple Inc. upgraded most of its Mac computers on Monday, including a powerful new offering for professional users, showing renewed commitment to a product line that critics say it neglected amid lackluster growth.

At its developer conference in San Jose, California, Apple unveiled new iMac desktop computers with brighter displays and faster Kaby Lake chips from Intel Corp. and more powerful graphics processing for virtual reality applications.

Updates to the 12-inch MacBook and flagship 13-inch and 15-inch MacBook Pros also included Intel’s Kaby Lake processors to make the laptops more efficient, and could result in improved battery life. These computers cost $1,299 to $2,399, the company said. The 13-inch MacBook Air also got a faster processor in a rare update.

The iPhone remains Apple’s most important product by far, but the company needs a range of devices to keep consumers locked into its profitable and growing ecosystem of services and apps. That means updating products for some markets that aren’t growing as fast as they once did.

The PC market, where Apple is fourth, grew less than 1 percent in the first quarter, compared to a year earlier, according to research firm IDC. The company’s Mac revenue fell last year, and while well received by many consumers, recent MacBook Pros have been criticized by some longtime Mac loyalists and creative professionals for not meeting some of their needs.

Apple has acknowledged that it needs to do better and on Monday it addressed some of these concerns by unveiling a new iMac Pro with super-fast Intel Xeon chips, Advanced Micro Devices Inc.’s Radeon Vega graphics processor, and up to 128 GB of pre-installed RAM. Starting at $4,999, its the most expensive and powerful computer Apple has made.

The Mac upgrades are Apple’s first to the MacBook Pro since the computer was revamped last fall with a slimmer design and the Touch Bar touchscreen strip on the keyboard. The 12-inch MacBook was last updated earlier last year with faster chips and a rose gold color option.

Alongside the Mac hardware upgrades, Apple also is discussing software updates to both at its conference this week. The new operating systems are expected to be released in the fall.Bloomberg

flag_australia AU: AiGroup Performance of Services Index. May 2017

Press Release Extract [ser_x1]

The Australian Industry Group Australian Performance of Services Index (Australian PSI®) dropped by 1.5 points to 51.5 points in May (seasonally adjusted) marking the eighth month of expansion or stable conditions for the sector. Results above 50 points indicate expansion, with higher numbers indicating a stronger rate of expansion.

Three of the five activity sub-indexes in the Australian PSI® indicated growth in May (seasonally adjusted). Sales increased but at a slower pace than April, at 52.5 points, new orders dropped to 52.8 points and the stocks index rose by 6.6 points to 53.6 points, moving from contraction into growth. Supplier deliveries experienced stable conditions (50.2) while employment fell into contraction at 49.2 from expansion in April.

Three of the larger sub-sectors expanded in the Australian PSI® in May (trend data) with results above 50 points. Property and business services continued to grow strongly in May, at 56.8 points. The hospitality sector (accommodation, cafes and restaurants) rose by 2.5 points to 54.5 points while the wholesale trade sub-index reduced slightly to 53.7. Transport and storage was stable at 50.6 points, a similar result to April.

Finance, retail trade, health and community services and communications services shrank at similar rates to the previous month. Personal and recreational services fell by 3.4 points to 43.9 points in May, indicating a faster rate of contraction.

Some respondents to the Australian PSI® reported favourable conditions due to stronger demand from government, the agriculture sector and infrastructure projects.

In the weaker sectors, respondents reported lower consumer confidence and spending, plus some reduction in demand from the mining sector and from business customers. Weaker demand was noted especially in Western Australia and South Australia in May.

Activity Sub-Indexes

  • Sales continued to grow in May but at a weaker pace than in April, with this sub-index falling by 2.5 points to 52.5 points (seasonally adjusted)
    • The retail trade sub-sector’s index indicated a mild contraction in May at 48.8 points, down 0.1 points from April (trend data). This marks the second month of contraction after three months of flat or slightly expansionary conditions in early 2017. Participants from this sub-sector in the Australian PSI® said lack of customer demand and reduced trade flowing through from weak mining activity had an adverse effect on sales in May.
  • The new orders sub-index dropped by 1.8 points to 52.8 points, indicating a more moderate pace. New orders have expanded for fifteen of the last sixteen months.
  • The employment sub-index fell into contraction in May falling 2.7 points to 49.2 points, down from 51.9 points (and indicating a modest expansion) in April.
  • The supplier deliveries sub-index in the Australian PSI® indicated stable conditions in May falling by 2.8 points to 50.2 points.
  • Stocks (inventories) in the Australian PSI® lifted from contraction into expansion, rising by 6.5 points to 53.6 points in May, following four months of decline. Nine of the past twelve months have seen a contraction in stocks, indicating a general decline in inventory levels across the services sector over that period.
  • Capacity utilisation across the services sector grew by 1.0 percentage point to 76.2% of available capacity in May, Capacity utilisation in the Australian PSI® has averaged 76.2% over the past year.

Prices Sub-Indexes

  • Input prices continued to rise in May, but at a slower pace than in April, with the sub- index for input costs falling by 2.1 points to 58.1 points. Rising energy costs continue to be a key source of input cost pressures at present, across a range of sub-sectors.
  • The wages sub-index indicated a reduced rate of pressure on remuneration, with this sub-index sinking by 7.9 points to 51.9 points in May. This was the lowest reading for the wages sub-index since July 2016, which is the last time it briefly touched below 50 points and indicating a contraction in wages (49.4 points in July 2016). This reflects the ongoing weakness that is apparent in Australian inflation and in the labour market.
  • Selling prices continued their flat run in May, with the sub-index rising by 0.6 points to 50.8 points and broadly indicating price stability. Selling prices have been lacklustre over the past 18 months, reflecting a tightly competitive market which makes it difficult for services businesses to pass on increased input costs to their customers.

Australian Industry Group, “Performance of Services Index. May 2017“, 5 Jun 2017 More

flag_australia AU: Business Indicators, Australia, Q1/2017

Press Comment: The Age

Company operating profits came in ahead of expectations, rising 6% in Q1/2017 while economists had predicted 0.5% growth. But it’s down from the super-sized 20.1% leap in Q4/2016, which was due to the rebound in commodity prices. Both of these numbers are factored into Wednesday’s Q1/2017 GDP figures, where economists are tipping a sharp slowdown in growth to just 0.3% over the quarter, from 1%.

Press Release Extract [ser_x2]

The trend estimate for inventories rose 0.6% in the March quarter 2017 (Q1/2017). The seasonally adjusted estimate rose 1.2% this quarter.
The trend estimate for Manufacturing sales of goods and services fell 1.0% this quarter. The seasonally adjusted estimate fell 1.4% this quarter.
The trend estimate for Wholesale trade sales of goods and services rose 1.9% this quarter. The seasonally adjusted estimate rose 1.5%.
The seasonally adjusted estimate for company gross operating profits rose 6.0% in the March quarter 2017.
The seasonally adjusted estimate for wages and salaries rose 0.3% in the March quarter 2017.

Australian Bureau of Statistics, “5676.0 – Business Indicators, Australia, Mar 2017 “, 5 Jun 2017 More

flag_australia AU: Australian Job Ads. May 2017

Press Release Extract [ser_x3]

ANZ Job Advertisements ticked up a modest 0.4% m/m to 169,994 in May 2017 in seasonally adjusted terms, following a solid 1.5% rise the previous month. The m/m rise has averaged 1.2% since the start of the year, compared to 0.4% m/m over the same period last year. Annual growth eased from 10.1% last month to 7.4% in May.

In trend terms Job Advertisements were up 0.6% m/m in May. The trend m/m growth rate has remained within the 0.6-0.7% range since June 2016.

ANZ Head of Australian Economics, David Plank, commented:

‘The strong rise in employment in April along with the drop in the unemployment rate to 5.7% was consistent with the strength in ANZ Job Advertisements since the start of the year. Despite the moderation in May, Job Advertisements indicate that employment growth is likely to continue over the coming months. The good news on the employment outlook contrasts with what is shaping up as a weak Q1 GDP report later this week. We think the outlook for the labour market will be critical for the path taken by monetary policy over the next six months. If the labour market falters then the prospect of further RBA easing will increase significantly.

In our view the unemployment rate is likely to edge downwards over the rest of the year, as official data catches up and matches the forward looking indicators. That being said, risks remain. In particular, given the level of spare capacity in the labour market, it is possible that additional demand for labour may be met by increasing the hours of part-time workers, which could keep the unemployment rate from falling. Moreover, spare capacity is expected to continue to weigh on wage growth over the next year, consistent with comments from the RBA’s liaison program and our own ANZ Wage Gauge. This in turn, is likely to have implications for consumption growth given the high levels of household debt and expected moderation in house price growth.

Overall, labour market conditions have improved since the latter half of 2016, and we expect this to continue over the coming months.’

ANZ Bank, “Australian Job Ads. May 2017“, 5 Jun 2017 Media Release (PDF)

flag_europe EU: IHS Markit Eurozone Composite PMI® (Final). May 2017

Press Release Extract [ser_x6]

Key findings:

  • Final Eurozone Composite Output Index: 56.8 (Flash: 56.8, April Final: 56.8)
  • Final Eurozone Services Business Activity Index: 56.3 (Flash: 56.2, April Final: 56.4)

eu_pmi_composite_20170605

The rate of eurozone economic growth continued to run at the quickest pace in six years during May. This was confirmed by the final IHS Markit Eurozone PMI® Composite Output Index posting 56.8, unchanged from the earlier flash estimate and April’s final reading.

The latest expansion of output was supported by strong growth of incoming new business. New orders increased at an identical pace to April, one of the steepest gains signalled for six years.

Optimism about the one-year outlook for output rose to its highest level since data for this series were first collected in July 2012. Strong new order inflows tested capacity, leading to rising volumes of outstanding business. This in turn led to faster job creation, with employment rising at one of the quickest rates seen over the past decade.

Price pressures meanwhile remained elevated, despite some easing in both input cost and output charge inflation. In both cases, rates of increase were nonetheless only moderately below highs reached earlier in the year.

By sector, the latest expansion of overall business activity was led by manufacturing. Goods production rose at the quickest pace in over six years, underpinned by a similarly strong increase in new orders received. Service sector activity rose at a rate little-changed from April’s six-year high, although new business grew at the slowest pace in four months.

National PMI data signalled that the solid rate of eurozone economic expansion mainly reflected improved performances in the ‘big-two’ nations. Rates of increase hit six-year highs in both Germany and France. German growth was led by a robust expansion of manufacturing production, whereas for France the service sector was the prime driver. Both nations also reported stronger rates of overall job creation.

Spain was in second position in the latest PMI Output Index rankings, despite seeing its rate of expansion ease from April’s high. Growth also decelerated slightly in Italy. Both nations also registered solid increases in employment. However, in line with the trend in output, the rates of job creation moderated.

Services

The rate of expansion in eurozone service sector business activity remained marked in May. This was signalled by the final IHS Markit Eurozone PMI® Services Business Activity Index posting 56.3, down slightly from 56.4 in April, and a tick above the earlier flash estimate of 56.2.

The headline services index has now indicated an increase in business activity for 46 successive months. Each of the ‘big-four’ national services economies registered an increase in output in May, although only France saw growth accelerate.

The steepest rate of expansion was recorded in Spain, followed closely by France. Growth stabilised at a solid pace in Germany and also remained marked in Italy (albeit slower than in the prior survey month).

Underlying the latest expansion of eurozone services business activity was a further substantial increase in new orders. The rate of growth remained above the long-run survey average, despite easing to a four-month low. The ongoing improvement of conditions in the service sector had a positive effect on business confidence, which hit an 85-month record high in May.

Strong new order growth continued to test capacity, leading to a further increase in backlogs of work. This in turn encouraged job creation, with staffing levels rising for the thirty-first successive month. Employment rose across the ‘big-four’ nations, although only France saw its pace of job creation accelerate (to the highest since August 2011).

On the price front, May’s survey showed a further solid increase in average charges. The rate of inflation was among the fastest registered during the past six years. Services firms also faced another strong rise in average costs, linked in many cases to salary pressures. The rate of increase was at a six-month low but still among the highest seen since the first half of 2011.

Comment: Chris Williamson, Chief Business Economist at IHS Markit said:

‘The final PMI readings add to mounting evidence that the eurozone is enjoying a strong second quarter, consistent with GDP rising at a 0.7% rate.

‘Encouragingly, both the hard data and the surveys are revealing a broad-based upturn. So far in the second quarter the PMI surveys are running at levels indicative of 0.7% GDP growth in France and Germany, with nearly 1% being signalled for Spain and 0.5% in Italy.

‘Official data have lagged behind the strength signalled by PMI data, but recent revisions to first quarter GDP estimates are now bringing the official numbers more in line with the surveys.

‘With the rate of job creation rising to one of the highest seen over the past decade, the recovery is also becoming more sustainable, as the improved labour market should feed through to higher consumer spending.

‘The outlook for the eurozone economy therefore seem to be tilting to the upside, and it seems likely that we’ll start to see many forecasters’ expectations for 2017 growth revised higher.’

IHS Markit, “IHS Markit Eurozone Composite PMI® – final data. May 2017 Includes IHS Markit Eurozone Services PMI®“, 5 Jun 2017 More

flag_usa US: Full Report on Manufacturers’ Shipments, Inventories and Orders. Apr 2017

Press Release Extract [ser_53]

Summary

New orders for manufactured goods in April, down following four consecutive monthly increases, decreased $0.8 billion or 0.2 percent to $469.0 billion, the U.S. Census Bureau reported today. This followed a 1.0 percent March increase. Shipments, up four of the last five months, increased $0.1 billion or virtually unchanged to $470.8 billion. This followed a 0.2 percent March decrease. Unfilled orders, up two consecutive months, increased $2.4 billion or 0.2 percent to $1,123.0 billion. This followed a 0.3 percent March increase. The unfilled orders-to-shipments ratio was 6.84, up from 6.81 in March. Inventories, up six consecutive months, increased $0.5 billion or 0.1 percent to $649.7 billion. This followed a 0.2 percent March increase. The inventories-to-shipments ratio was 1.38, unchanged from March.

New Orders

New orders for manufactured durable goods in April, down following four consecutive monthly increases, decreased $1.8 billion or 0.8 percent to $231.0 billion, down from the previously published 0.7 percent decrease. This followed a 2.4 percent March increase. Transportation equipment, down following two consecutive monthly increases, led the decrease, $1.1 billion or 1.4 percent to $78.4 billion. New orders for manufactured nondurable goods increased $1.0 billion or 0.4 percent to $238.0 billion.

us_orders_20170605

Shipments

Shipments of manufactured durable goods in April, down three of the last four months, decreased $0.9 billion or 0.4 percent to $232.8 billion, down from the previously published 0.3 percent decrease. This followed a 0.1 percent March decrease. Transportation equipment, down six of the last seven months, led the decrease, $0.5 billion or 0.7 percent to $77.1 billion. Shipments of manufactured nondurable goods, up eight of the last nine months, increased $1.0 billion or 0.4 percent to $238.0 billion. This followed a 0.3 percent March decrease. Food products, up seven of the last eight months, led the increase, $0.8 billion or 1.1 percent to $68.3 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in April, up two consecutive months, increased $2.4 billion or 0.2 percent to $1,123.0 billion, virtually unchanged from the previously published increase. This followed a 0.3 percent March increase. Transportation equipment, also up two consecutive months, led the increase, $1.4 billion or 0.2 percent to $766.7 billion.

Inventories

Inventories of manufactured durable goods in April, up nine of the last ten months, increased $0.7 billion or 0.2 percent to $394.6 billion, up from the previously published 0.1 percent increase. This followed a 0.3 percent March increase. Primary metals, also up nine of the last ten months, led the increase, $0.3 billion or 0.9 percent to $32.7 billion. Inventories of manufactured nondurable goods, down two consecutive months, decreased $0.2 billion or 0.1 percent to $255.1 billion. This followed a virtually unchanged March decrease. Beverage and tobacco products, also down two consecutive months, led the decrease, $0.1 billion or 0.3 percent to $23.5 billion. By stage of fabrication, April materials and supplies increased 0.8 percent in durable goods and increased 0.7 percent in nondurable goods. Work in process decreased 0.5 percent in durable goods and increased 0.4 percent in nondurable goods. Finished goods increased 0.4 percent in durable goods and decreased 0.8 percent in nondurable goods.

US Census Bureau, “Full Report on Manufacturers’ Shipments, Inventories and Orders. Apr 2017“, 5 Jun 2017 (10:00) More

flag_usa US: Non-Manufacturing ISM Report On Business. May 2017

Press Release Extract [ser_59]

“The NMI® registered 56.9 percent, which is 0.6 percentage point lower than the April reading of 57.5 percent. This represents continued growth in the non-manufacturing sector at a slightly slower rate.

The Non-Manufacturing Business Activity Index decreased to 60.7 percent, 1.7 percentage points lower than the April reading of 62.4 percent, reflecting growth for the 94th consecutive month, at a slower rate in May.

The New Orders Index registered 57.7 percent, 5.5 percentage points lower than the reading of 63.2 percent in April.

The Employment Index increased 6.4 percentage points in May to 57.8 percent from the April reading of 51.4 percent.

The Prices Index decreased 8.4 percentage points from the April reading of 57.6 percent to 49.2 percent, indicating prices decreased in May for the first time after 13 consecutive months of increasing.

According to the NMI®, 17 non-manufacturing industries reported growth.

Although the non-manufacturing sector’s growth rate dipped in May, the sector continues to reflect strength, buoyed by the strong rate of growth in the Employment Index.

The majority of respondents’ comments continue to indicate optimism about business conditions and the overall economy.

The 17 non-manufacturing industries reporting growth in May — listed in order — are: Real Estate, Rental & Leasing; Construction; Accommodation & Food Services; Utilities; Arts, Entertainment & Recreation; Wholesale Trade; Mining; Health Care & Social Assistance; Management of Companies & Support Services; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Finance & Insurance; Public Administration; Transportation & Warehousing; Information; and Other Services.

The only industry reporting contraction in May is Educational Services

Institute for Supply Management, “Non-Manufacturing ISM Report On Business. May 2017“, 5 Jun 2017 (10:00) More

flag_usa US: Services PMI. May 2017

Press Release Extract [ser_x7]

Key findings:

  • New business grows at fastest pace since January
  • Business activity continues to expand at solid rate
  • Job creation accelerates to three-month high.

us_psi_20170605

Growth of business activity in the US service sector accelerated slightly in May, reaching a three-month high. This extended the current period of activity growth to 15 months. New business also expanded at a quicker pace, and grew at the fastest rate since January. Subsequently, firms added to their payrolls again with the rate of growth accelerating to a three-month high. Input price inflation softened fractionally, while prices charged by US service providers increased at a faster pace.

The seasonally adjusted Business Activity Index continued to run above the crucial 50.0 no-change mark during May. A reading of 53.6, up from 53.1 in April, signalled the largest rise in overall activity since February.

The rate of growth in new business meanwhile accelerated from April to a four-month high. Panellists noted that stronger demand from new and existing clients led to increased volumes of new orders.

Anecdotal evidence stated that the expansion in new business had a knock-on effect on the level of outstanding work reported by service providers. For the first time since January, backlogs increased during May. The pace of accumulation, though moderate, was the strongest since last October.

The trend of job creation, which began in March 2010, was extended in May. The rate of payroll expansion accelerated to a three-month high. Panellists commonly attributed the rise in staffing levels to new projects and higher overall business activity.

On the price front, the rate of input price inflation softened fractionally from April’s 21-month high. The pace of increase was broadly in line with the series average. Anecdotal evidence generally associated increased cost burdens to higher prices for goods purchased, as well as wage rises.

Panellists noted that higher input costs were generally passed on to clients. Output prices consequently rose for the fifteenth consecutive month, with the pace of charge inflation accelerating from April. The rate of increase was the second-fastest in the current sequence.

The degree of confidence among service providers remained positive, but relatively subdued, in May. Despite some respondents linking optimism to strong underlying demand, others were more cautious regarding future business activity.

IHS Markit Final U.S. Composite PMI™

The final seasonally adjusted IHS Markit U.S. Composite PMITM Output Index rose to 53.6 in May, up from the previous month’s reading of 53.2.

us_pmi_composite_20170605

Although the rate of growth in both sectors was relatively subdued, the trend for the first five months of 2017 is stronger than the same period in 2016.

Similar rates of expansion were seen in the manufacturing and service sectors, albeit with service providers experiencing a fractionally quicker acceleration than goods producers. However, growth rates remained relatively muted.

The composite index is based on original survey data from the IHS Markit U.S. Services PMI and the IHS Markit U.S. Manufacturing PMI.

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

‘Although service sector business activity picked up in May, the PMI surveys for manufacturing and services collectively indicate only a modest pace of economic growth so far in the second quarter.

‘Historical comparisons with GDP indicate the PMI is signalling second quarter GDP growth of just over 2%, suggesting there may be some downside risks to IHS Markit’s current forecast of a GDP growth rebound to just over 3% in the second quarter.

‘However, the key message from the PMI is that the economy is enjoying steady, albeit unspectacular, growth, and that the pace of expansion has been slowly lifting higher in recent months.

‘Hiring meanwhile remains on a firm footing, with the survey’s employment indicators running at levels consistent with around 160,000 jobs added to the economy in May.

‘In another sign of the economy’s underlying steady expansion, average prices charged for goods and services is running at the second highest in almost two years, indicating that rising demand is helping restore some pricing power.’

IHS Markit, “IHS Markit U.S. Services PMI™ – final data (with composite PMI™)“, 5 Jun 2017 (09:45) More

Global: JPMorgan Global Services PMI. May 2017

Press Release Extract [ser_x8]

The expansion of global service sector activity accelerated to a four-month high in May. This was signalled by the J.P.Morgan Global Services Business Activity Index – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posting 53.8, up from 53.6 in each of the prior two months.

global_psi_20170605

The headline index has now remained above the neutral 50.0 mark for 94 months. The latest reading was above the average for that sequence, while the average so far in quarter two (53.7) is above that signalled in the opening quarter of the year (53.5).

Output growth picked up to the quickest in one-and-a-half years in the financial services sector. Business service providers also saw an improvement in their rate of expansion to the fastest since January. In contrast, the consumer services category recorded the slowest rate of
increase overall and its weakest for three months.

The eurozone remained a bright spot for the global service sector, registering the fastest growth rate (on average) of the main economic regions. Although the rate of expansion in euro area services output eased slightly, it was still among the best seen during the past six years.

National PMI data pointed to stronger growth of service sector activity in the US, China, Japan, India and Russia. The rate of increase slowed in the UK, while Brazil moved back into contraction territory.

Growth of new orders in the global service sector hit a four-month high in May. This contributed to further increases in both backlogs of work and employment. Staffing levels rose at the quickest pace since January, with job creation registered in the euro area, the US, China, Japan, the UK, India and Russia.

Input cost inflation eased slightly in May. However, service providers maintained sufficient pricing power to initiate a stronger increase in output charges. Both price measures signalled sharper rates of inflation (on average) in developed nations compared to emerging markets.

J.P.Morgan and IHS Markit in association with ISM and IFPSM , “ JPMorgan Global Services PMI. May 2017“, 5 Jun 2017 (11:00) More

Global: JPMorgan Global Composite PMI. May 2017

Press Release Extract [ser_x9]

The rate of global economic expansion remained solid and steady in May. Underpinning the latest increase in output were stronger inflows of new orders, faster job creation, rising backlogs of work and improved business sentiment.

global_pmi_composite_20170605

The J.P.Morgan Global All-Industry Output Index which is produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posted 53.7 in May, up
slightly from 53.6 in April. The rates of growth signalled by the headline index have been broadly stable throughout the past eight months.

The expansion remained broad-based by sector. Manufacturing production continued to rise at a solid pace, albeit the weakest in six months, with similar rates of expansion signalled across the consumer, intermediate and investment goods categories.

Meanwhile, growth of worldwide service sector activity accelerated to a four-month high. Rates of expansion improved in the business and financial services categories, but eased at consumer service providers.

By nation, economic activity increased across all of the major regions covered by the survey. The euro area was a bright spot, with its pace of growth steadying at April’s six- year record. Rates of expansion accelerated in the US, China, Japan, India and Russia. Growth slowed in the UK, while Brazil saw only a marginal increase in output (at a rate of expansion identical to the prior survey month).

May signalled the steepest increase in new orders in four months. This tested capacity at both manufacturers and service providers, leading to the sharpest accumulation of backlogs of work since November 2013.

The improving performance of the global economy had a positive effect on business sentiment. Optimism regarding the one-year outlook for output rose to a four-month high and back above the long-run series average.

Job creation was recorded for the eighty-seventh successive month in May. Moreover, the rate of increase accelerated to a three-month high and was among the best registered during the past two years. Staffing levels rose in the US, the euro area, Japan, the UK, India and Russia, but fell in China and Brazil.

Input cost inflation eased to a seven-month low in May, while output charges rose at a pace identical to April. Both price measures tended to signal sharper increases (on average) in developed nations compared to emerging markets.

J.P.Morgan and IHS Markit in association with ISM and IFPSM , “J.P.Morgan Global Manufacturing & Services PMI™“, 5 Jun 2017 (11:00) More

flag_japan Japan update

Nikkei Japan Services PMI. May 2017

Press Release Extract [ser_x4]

Key points:

  • Higher activity underpinned by sharpest increase in new work for four years
  • Job numbers rise as backlogs continue to grow
  • Confidence at highest since June 2013

jp_psi_20170605

The Japanese service sector maintained its recent run of expansion during May, with activity continuing to rise in line with increased volumes of new business. Moreover, as new work rose at a faster pace, pressure on capacity persisted, leading to an increase in backlogs of work and encouraging companies to add to their workforce numbers.

On the price front, input cost inflation accelerated to a three-month high, leading to a modest increase in output charges. Companies also retained a positive outlook, with confidence regarding future activity the highest in just under four years.

The headline index from the survey – the seasonally adjusted Business Activity Index – improved to a level of 53.0 in May, up from 52.2 in the preceding month. Indicative of solid growth, the latest index reading was the best recorded by the survey since August 2015.

With manufacturing growth reaching a three-month high, the Nikkei Composite Output Index improved to 53.4 in May, from 52.6 in April and a 40-month high.

Underlying the latest increase in services activity was a similarly-sized rise in incoming new business. The latest survey showed that growth was at a four- year high, underpinned by higher demand for services at a time when clients were turning increasingly busy.

In line with the recent trend, service sector companies reported increasing pressure on their capacity during the month, as highlighted by another rise in levels of work outstanding. There were reports from panellists that ongoing growth in new business had strained existing resources. A number of companies responded by raising their workforce numbers, the net effect being an increase in employment that was the greatest recorded in four years.

Meanwhile, manufacturing employment rose at a solid pace during the month meaning the overall composite increase in staffing numbers was the best recorded since November 2007.

Service sector jobs were created not only in response to increased volumes of incoming new business, but also in line with positive projections for activity in the coming 12 months. Optimism was linked to expected increases in new work, plus planned new product launches and events. Overall, the degree of positive sentiment was the highest recorded by the survey since June 2013.

Average input prices faced by service providers continued to increase during May. Inflation has been recorded consecutively for over four-and-a- half years, with the latest rate the sharpest since February. Companies reported that inflation had been underpinned by higher transport costs and rising wage costs.

In response, a number of firms chose to raise their output prices, although the overall aggregate increase was again only marginal.

Manufacturers also reported a further increase in input prices in May, with the rate of inflation hitting its lowest level in four months. Competitive pressures meant that output prices charged by manufacturers continued to rise marginally.

Commenting on the Japanese Services PMI survey data, Paul Smith, Senior Economist at IHS Markit, which compiles the survey, said:

‘Concurrently stronger growth in the manufacturing and service sectors during May underpinned the best rise in overall activity in just under three-and-a- half years. Following the 0.5% GDP expansion during Q1, the PMI data are suggestive of further national output expansion in the second quarter.

‘Ongoing economic growth is having a positive spill-over effect on the performance of the labour market, with jobs being added at the fastest rate in nearly a decade. Expect this positive trend in employment to continue, with overall business confidence in May the highest in four years.’

IHS Markit, “Nikkei Japan Services PMI. May 2017“, 5 Jun 2017 More

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flag_china China update

Caixin China General Services PMI

Press Release Extract [ser_x5]

Key points:

  • Stronger services activity growth offsets weaker expansion in manufacturing output
  • Solid rise in new business at services companies contrasts with marginal uptick at goods producers
  • Employment at the composite level declines at faster pace.

cn_psi_20170605

The Caixin China Composite PMI™ data (which covers both manufacturing and services) indicated only a modest expansion of overall output during May. At 51.5, the Composite Output Index rose slightly from April’s ten-month low of 51.2, but nonetheless posted the second-lowest reading seen since September 2016.

Data split by sector highlighted differing trends, with service providers noting an acceleration in business activity growth while manufacturers saw only a marginal rise in production. Furthermore, goods producers registered the slowest increase in output for 11 months. In contrast, services activity expanded at a solid pace that was the quickest since January, as shown by the seasonally adjusted Caixin China General Services Business Activity Index posting 52.8 in May, up from 51.5 in April.

Stronger growth in services activity reflected a quicker increase in total new business during May. Moreover, the latest expansion in new orders was the most marked in the year-to-date and solid amid reports of stronger underlying client demand. In line with the trend for production, manufacturers saw a further slowdown in new order growth to the weakest in the current 11-month sequence of expansion. The faster increase in new orders across the service sector offset the weaker rise at goods producers, and therefore growth in composite new work held steady at April’s modest pace.

Employment continued to increase across China’s service sector in May. That said, the rate of job creation eased to the weakest in the current nine-month sequence of growth. Meanwhile, manufacturing firms continued to pare back staff numbers, with the latest reduction the quickest since last September. As a result, composite employment fell for the second month in a row in May and at a rate that, though marginal, was the fastest in eight months.

After a marginal fall in April, the amount of unfinished work rose slightly across services companies in May. According to panellists, higher new orders contributed to renewed pressure on operating capacity. Backlogs of work also increased across the manufacturing sector in May and at the quickest rate in 2017 so far. At the composite level, outstanding business rose at a modest rate that was the fastest for four months.

Cost pressures intensified at services companies during May, with the rate of input price inflation picking up from the six-month low in April. The solid increase in input costs was generally linked to greater prices for raw materials and higher staff costs. In contrast, manufacturing companies recorded the first fall in cost burdens since June 2016, albeit only slight. Consequently, input prices at the composite level rose at a modest pace that was the weakest in 11 months.

May survey data pointed to a further increase in prices charged for Chinese services, thereby extending the current period of inflation to 14 months. That said, the rate at which charges were raised remained slight. Reflective of the trend for input costs, manufacturers cut their selling prices in May. Though only marginal, it was the first time that factory gate charges had declined since February 2016. Output charges at the composite level were therefore broadly unchanged, which ended a 14-month sequence of inflation.

Confidence towards the 12-month outlook improved slightly across the service sector in May, with the degree of optimism lifting from April’s five-month low. Manufacturing companies meanwhile expressed a strong level of positive sentiment that was unchanged from the previous month. At the composite level, optimism towards the business outlook strengthened slightly, but remained below the series average.

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

‘The headline Caixin China General Services PMI was 52.8 in May, up 1.3 points from April. It marked the first uptick this year and was the highest reading in four months. The new business sub-index hit the highest point since December and the input costs sub-index signalled stronger cost pressures. However, the prices charged sub-index fell for the second consecutive month.

‘The headline Caixin China Composite PMI came in at 51.5 in May, up by 0.3 points from the previous month but remained at a low level.

‘The improvement in the services sector bolstered the Chinese economy in May. However, the rapid deterioration in the manufacturing industry is worrying. We need to closely monitor whether the diverging trends in manufacturing and services will widen further.’

IHS Markit, “Caixin China General Services PMI™. May 2017“, 5 Jun 2017 More

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