Tue 1 Aug 2017

watch Nightly Business Report. watch Bloomberg Technology. watch Bloomberg Surveillance.
watch Bloomberg TV: Tim Cook speaks about Apple’s earnings report.

In Portfolioticker today

Today at the stock market

bull/bearThe Dow Jones Industrial Average closed at a record and moved within reach of 22,000, while the S&P 500 Index retreated from a historic high. The Bloomberg dollar index (DXY) edged up after posting a 5th straight monthly loss in Jul 2017 as a reading on manufacturing last month fell short of expectations and data showed spending by U.S. consumers barely grew in Jun 2017. The yield on 10-year Treasury notes slipped to 2.25%. Crude fell back after topping $50/barrel.

  • The S&P 500 Index rose 0.2%, falling just short of the all-time high it reached last week.
  • The Dow added 73 points to 21,963.92, a new record, and closed in on its round-number milestone.
  • The MSCI All-Country World Index climbed 0.4% to the highest on record.
  • The Stoxx Europe 600 Index increased 0.6%.
  • The MSCI Emerging Market Index gained 0.2%.

As economic data largely supports the global growth story and company earnings in many cases beat estimates, investors will be forgiven for diving further into a bull market that’s propelled equity markets the world over to unprecedented levels. But with valuations well above average, monetary policy poised to turn hawkish and a U.S. administration mired in controversy there remains a degree of caution in markets.

Figures from gross domestic product and economic confidence to joblessness and manufacturing output signaled the euro-area economy was gaining steam, but it wasn’t enough to reverse a drop in the EUR and most benchmark government bonds rose.

Meanwhile, the Reserve Bank of Australia held the benchmark cash rate at 1.5% while warning that a rising AUD is expected to subdue inflation and weigh on the outlook for growth and employment. The AUD fluctuated, dipping below USD 0.80 and jumping as high as USD 0.8043.Bloomberg

Market indices

:-) The Dow Jones Industrial Average closed on a record high of 21,963.92, up 0.33% on yesterday’s record of 21,891.12.

Index Ticker Today Change 31 Dec 16 YTD
S&P 500 SPX (INX) 2,476.35 +0.24% 2,238.83 +10.60%
DJIA INDU 21,963.92 +0.33% 19,762.60 +11.13%
NASDAQ IXIC 6,362.94 +0.23% 5,383.12 +18.20%

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 2.716 +0.69% 2.105 +29.04%
Valuation Rate USD/AUD 0.80162 -0.41% 0.72663 +10.32%
AUD-denominated Index AUD 3.392 +1.09% 2.895 +17.15%

Portfolio stock prices

:-) Visa closed on a record high of $100.87, up 2 cents on its 26 Jul 2017 record of $100.85.

Stock Ticker Today Change 31 Dec 16 YTD
Alphabet A GOOGL $946.56 +0.11% $792.45 +19.44%
Alphabet C GOOG $930.83 +0.04% $771.82 +20.60%
Apple AAPL $150.05 +0.89% $115.82 +29.55%
Amazon AMZN $996.19 +0.85% $749.87 +32.84%
Ebay EBAY $35.91 +0.50% $29.69 +20.94%
Facebook FB $169.86 +0.36% $115.05 +47.64%
PayPal PYPL $59.34 +1.35% $39.47 +50.34%
Twitter TWTR $16.21 +0.75% $16.30 -0.56%
Visa V $100.87 +1.32% $78.02 +29.28%
VMware VMW $92.70 -0.01% $78.73 +17.74%



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%.
The EUR fell 0.3% to USD 1.1802.
Britain’s GBP fell 0.1% to USD 1.3203.


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

Oil and Gas Futures

Futures prices

Prices are as at 15:48 ET

  • NYMEX West Texas Intermediate (WTI): $49.21/barrel -1.91% Chart
  • ICE (London) Brent North Sea Crude: $51.82/barrel -1.71% Chart
  • NYMEX Natural gas futures: $2.82/MMBTU +1.00% Chart

Apple Q3/2017 Earnings Report

Press Release

Apple today announced financial results for its fiscal 2017 third quarter ended July 1, 2017. The Company posted quarterly revenue of $45.4 billion and quarterly earnings per diluted share of $1.67. These results compare to revenue of $42.4 billion and earnings per diluted share of $1.42 in the year-ago quarter. International sales accounted for 61 percent of the quarter’s revenue.
“With revenue up 7 percent year-over-year, we’re happy to report our third consecutive quarter of accelerating growth and an all-time quarterly record for Services revenue,” said Tim Cook, Apple’s CEO. “We hosted an incredibly successful Worldwide Developers Conference in June, and we’re very excited about the advances in iOS, macOS, watchOS and tvOS coming this fall.”
“We reported unit and revenue growth in all our product categories in the June quarter, driving 17 percent growth in earnings per share,” said Luca Maestri, Apple’s CFO. “We also returned $11.7 billion to investors during the quarter, bringing cumulative capital returns under our program to almost $223 billion.”
Apple is providing the following guidance for its fiscal 2017 fourth quarter:

  • revenue between $49 billion and $52 billion
  • gross margin between 37.5 percent and 38 percent
  • operating expenses between $6.7 billion and $6.8 billion
  • other income/(expense) of $500 million
  • tax rate of 25.5 percent

Apple’s board of directors has declared a cash dividend of $0.63 per share of the Company’s common stock. The dividend is payable on August 17, 2017 to shareholders of record as of the close of business on August 14, 2017.

Apple, “Apple Reports Third Quarter Results: Revenue Growth of 7 Percent and EPS Growth of 17 Percent, Services Revenue Hits All-Time Quarterly RecordPress Release Financials Data

Market reaction


flag_australia AU: Performance of Manufacturing Index. Jul 2017

Press Release Extract [ser_76]

Key Findings:

  • The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI®) increased by 1.0 point in July to 56.0 points (seasonally adjusted). Results above 50 indicate expansion with higher results indicating a stronger expansion. This was the tenth consecutive month of expansion for the Australian PMI®.


  • Six of the seven activity sub-indexes in the Australian PMI® expanded in July (seasonally adjusted). New orders (55.8 points) sales (55.8 points) and deliveries (54.0 points) expanded at a moderating pace. Production (59.0 points) strengthened, exports (53.9 points) remained expansionary and employment (57.4 points) bounced into expansion. Inventories (49.0 points) contracted at a slower pace than in June.
  • Six of the eight sub-sectors in the Australian PMI® expanded in July (trend). Non-metallic mineral products (69.3 points), wood & paper products (67.0 points) and petroleum, coal & chemical products (56.3 points) expanded more strongly than last month. Food & beverages (55.9 points) and metal products (56.1 points) and machinery & equipment (58.0 points) kept expanding but at a slower pace. Textiles, clothing, furniture & other products (34.7 points) fell deeper into contraction, while printing & recorded media (47.9 points) moved into contraction after a welcome expansionary streak.
  • In July manufacturers cited increased demand from construction, mining (possibly reflecting commodity price increases) and agriculture for locally manufactured construction materials, machinery and equipment. Large government funded projects in NSW and Vic are also providing a positive source of demand, as is a strong pipeline of solar and wind power projects. However manufacturers across many sectors are seeing significant challenges from: soaring energy costs; higher raw material costs (the flipside of higher commodity pricing); the stronger Australian dollar; the departure of automotive assembly; strong international competition; and ongoing weakness in the retail sector.

Activity Sub Indexes:

  • The production sub-index increased by 1.7 points to 59.0 points in July (seasonally adjusted). This sub-index has shown a stronger rate of expansion in 2017, with an average of 58.7 points over the last six months.
  • The new orders sub-index fell by 3.7 points to 55.8 points in July, indicating a slower but still solid rate of expansion. This suggests further growth ahead for manufacturing.
  • The sales sub-index fell by 5.1 points to 55.8 points but remained strongly expansionary. This was the sixth month of expansion for this sub-index.
  • The exports sub-index eased by 0.7 points to 53.9 points in July. Key sub-sectors showing expansions in exports in July were the food & beverages and metal products sub-sectors.
  • The employment sub-index bounced 8.4 points higher in July, sending the sub-index back into expansion at 57.4 points. This is consistent with recent ABS labour force estimates, showing a recovery in manufacturing employment to May and growth in full-time employment through May and June.
  • The deliveries sub-index fell by 3.4 points but remained in expansion at 54.0 points in July.
  • The stocks sub-index (inventories) increased by 4.7 points to 49.0 points in July, indicating
    a slower pace of contraction than in June.
  • Capacity utilisation eased by 0.9 percentage points in July to 76.3% of available capacity.

Wages and Prices Sub-Indexes:

  • The input prices sub-index increased by 4.4 points to 69.3 points in July. Input prices continue to increase for manufacturers, mainly driven by spiralling energy costs and rising raw materials prices (due to higher prices for some key commodities).
  • The wages sub-index decreased by 4.7 points to less expansionary 55.7 points July. This is slightly lower than the average over the past six-months (58.1 points) for this sub-index.
  • The manufacturing selling price sub-index increased by 2.9 points to a neutral 50.0 points in July. After a brief period of price increases, manufacturers seem to be limited in their ability to pass through further increases in energy, input costs and wages. Most sub- sectors are showing negative or subdued growth in selling prices in July. The pressure on manufacturer’s margin is ongoing. Mounting energy costs are adding to this problem.

Australian Industry Group, “Performance of Manufacturing Index. Jul 2017“, 1 Aug 2017 More

flag_australia AU: Monetary Policy Decision (OCR)

Press Release Extract [ser_51]

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy are continuing to improve. Labour markets have tightened further and above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy has picked up a little and is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk. Commodity prices have generally risen recently, although Australia’s terms of trade are still expected to decline over the period ahead.

Wage growth remains subdued in most countries, as does core inflation. Headline inflation rates have declined recently, largely reflecting the earlier decline in oil prices. In the United States, the Federal Reserve expects to increase interest rates further and there is no longer an expectation of additional monetary easing in other major economies. Financial markets have been functioning effectively and volatility remains low.

The Bank’s forecasts for the Australian economy are largely unchanged. Over the next couple of years, the central forecast is for the economy to grow at an annual rate of around 3 per cent. The transition to lower levels of mining investment following the mining investment boom is almost complete, with some large LNG projects now close to completion. Business conditions have improved and capacity utilisation has increased. Some pick-up in non-mining business investment is expected. The current high level of residential construction is forecast to be maintained for some time, before gradually easing. One source of uncertainty for the domestic economy is the outlook for consumption. Retail sales have picked up recently, but slow growth in real wages and high levels of household debt are likely to constrain growth in spending.

Employment growth has been stronger over recent months, and has increased in all states. The various forward-looking indicators point to continued growth in employment over the period ahead. The unemployment rate is expected to decline a little over the next couple of years. Against this, however, wage growth remains low and this is likely to continue for a while yet.

The recent inflation data were broadly as the Bank expected. Both CPI inflation and measures of underlying inflation are running at a little under 2 per cent. Inflation is expected to pick up gradually as the economy strengthens. Higher prices for electricity and tobacco are expected to boost CPI inflation. A factor working in the other direction is increased competition from new entrants in the retail industry.

The Australian dollar has appreciated recently, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

Conditions in the housing market vary considerably around the country. Housing prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease. In some other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities. Investors in residential property are facing higher interest rates. There has also been some tightening of credit conditions following recent supervisory measures to address the risks associated with high and rising levels of household indebtedness. Growth in housing debt has been outpacing the slow growth in household incomes.

The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Reserve Bank of Australia, “Monetary Policy Decision (OCR)“, 1 Aug 2017 More

flag_europe EU: GDP. Q2/2017 (Preliminary Flash Estimate)

Press Release Extract [ser_52]

Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and in the EU28 during the second quarter of 2017, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2017, GDP had grown by 0.5% in both zones.


Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.1% in the euro area and by 2.2% in the EU28 in the second quarter of 2017, after +1.9% and +2.1% in the previous quarter.

Eurostat, “GDP. Q2/2017 (Preliminary Flash Estimate)“, 1 Aug 2017 More

flag_europe EU: Eurozone Manufacturing PMI. Jul 2017

Press Release Extract [ser_eu_pmi]

Key findings:

  • Final Eurozone Manufacturing PMI at 56.6 in July (Flash: 56.8, June Final: 57.4)
  • Growth recorded across all nations covered, led by Austria, the Netherlands and Germany
  • Input price pressures abate further


The start of the third quarter saw a slight moderation in the recent strong rate of expansion of the eurozone manufacturing sector. This was signalled by the final IHS Markit Eurozone Manufacturing PMI® posting 56.6 in July, down from June’s 74-month high of 57.4 and below the earlier flash estimate of 56.8. The PMI has remained above the no-change mark of 50.0 for 49 successive months.

National surveys pointed to broad-based growth, with PMI readings for all eight of the countries monitored signalling expansion. The strongest improvements in operating conditions were registered in Austria, the Netherlands and Germany, although of these nations only the Netherlands saw a faster rate of expansion (75-month high).

Solid increases were also seen in Italy, France, Ireland and Spain. Growth in France accelerated to one of the fastest rates in over six years, whereas the other three nations all recorded slower improvements than in the prior month. The Greece PMI held steady at 50.5, to signal expansion for only the sixth time in the past three years.

Manufacturing production continued to rise at a marked pace in July. Companies benefitted from solid gains in new business from both domestic and foreign clients. Although rates of expansion in output (six-month low), new orders (five-month low) and new export business (four-month low) all eased during the latest survey month, they nonetheless remained among the best registered since the first half of 2011.

Rising inflows of new business tested capacity and led to a further accumulation of backlogs of work. Outstanding business increased for the twenty- seventh consecutive month, with the rate of expansion close to June’s seven-year high.

The combination of rising order inflows and backlogs of work underpinned further strong job creation. Rates of increase in June and July have been close to May’s survey-record high.

Employment rose in all of the nations covered, led by robust increases in Austria, the Netherlands and Germany. Jobs growth improved in France, Spain and the Netherlands, but eased elsewhere. In the case of France, the rate of increase was the fastest in almost 17 years.
The outlook for the eurozone manufacturing sector remained positive in July. Business optimism regarding production volumes in one year’s time dipped only slightly from June’s series-record high. Almost all of the nations covered (the exceptions being Italy and Ireland) reported relatively strong degrees of optimism.

Price pressures showed further signs of easing in July. Input cost inflation slowed to a nine-month low, while charges rose to the weakest extent during the year so far. Apart from increased raw material prices, cost pressures also reflected a sellers’ market developing for a number of purchased goods. This was highlighted by the trend in suppliers’ delivery times, which lengthened to the greatest degree since April 2011.

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

“Eurozone factories were buzzing with activity again in July. The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading. The survey indicates that manufacturing output was growing at an annual rate of approximately 4% at the start of the third quarter, sustaining the best growth spell that the region has seen for six years.

“Germany clearly remains a major driver of the upturn, with only neighbouring Austria and the Netherlands enjoying faster rates of expansion. But this is a broad-based revival nonetheless, with even Greece enjoying its first back-to-back monthly improvement in manufacturing conditions for three years.

“Employment growth meanwhile continued to run at one of the highest rates seen for at least 20 years, with the hiring boom underscoring the current ebullient mood within euro area factories.

“Despite the near-record rise in employment, companies continued to struggle to meet order book growth, with capacity constraints both at factories and their suppliers becoming increasingly widespread in recent months. While price pressures eased in July, inflationary pressures could pick up again if demand continues to outstrip supply.

IHS Markit, “Eurozone Manufacturing PMI. Jul 2017“, 1 Aug 2017 More

flag_usa US: Personal Income and Outlays. Jun 2017

Press Release Extract [ser_6]

Personal income decreased $3.5 billion (less than -0.1 percent) in June according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased $4.2 billion (less than -0.1 percent) and personal consumption expenditures (PCE) increased $8.1 billion (0.1 percent).

Real DPI decreased 0.1 percent in June and Real PCE increased less than 0.1 percent. The PCE price index increased less than 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

The decrease in personal income in June primarily reflected decreases in personal dividend income and personal interest income that were partially offset by an increase in compensation of employees. The June decrease in personal dividend income reflected a return to prior levels after a notable increase in May.

The $4.5 billion increase in real PCE in June primarily reflected a $10.0 billion increase in spending for services that was partially offset by a decline of $4.4 billion in spending for nondurable goods and a decline of $2.3 billion in spending for durable goods. Within services, the primary contributor to the increase was spending for health care. Within goods, gasoline was the leading contributor to the decline.

Personal outlays increased $14.1 billion in June. Personal saving was $546.4 billion in June and the personal saving rate, personal saving as a percentage of disposable personal income, was 3.8 percent.

Bureau of Economic Analysis, “Personal Income and Outlays. Jun 2017“, 1 Aug 2017 (08:30) More

flag_usa US: Manufacturing ISM Report on Business. Jul 2017

Press Release Extract [ser_99]

The July PMI® registered 56.3 percent, a decrease of 1.5 percentage points from the June reading of 57.8 percent.
The New Orders Index registered 60.4 percent, a decrease of 3.1 percentage points from the June reading of 63.5 percent.
The Production Index registered 60.6 percent, a 1.8 percentage point decrease compared to the June reading of 62.4 percent.
The Employment Index registered 55.2 percent, a decrease of 2 percentage points from the June reading of 57.2 percent.
The Supplier Deliveries Index registered 55.4 percent, a 1.6 percentage point decrease from the June reading of 57 percent.
The Inventories Index registered 50 percent, an increase of 1 percentage point from the June reading of 49 percent.
The Prices Index registered 62 percent in July, an increase of 7 percentage points from the June reading of 55 percent, indicating higher raw materials prices for the 17th consecutive month, with a faster rate of increase in July compared with June.

Of the 18 manufacturing industries, 15 reported growth in July in the following order: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Wood Products; Fabricated Metal Products; Machinery; Chemical Products; Paper Products; Food, Beverage & Tobacco Products; Printing & Related Support Activities; Computer & Electronic Products; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Primary Metals; and Transportation Equipment.

Three industries reported contraction in July compared to June: Apparel, Leather & Allied Products; Textile Mills; and Petroleum & Coal Product.

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

flag_usa US: Manufacturing PMI. Jul 2017

Press Release Extract [ser_us_pmi]

Key findings:

  • PMI reaches four-month high of 53.3
  • Growth in output and new orders rebounds
  • Inflationary pressures remain muted


July survey data signalled a solid improvement in operating conditions in the US manufacturing sector. The upturn in business conditions was largely driven by marked and accelerated expansions in both output and new orders. Meanwhile, firms added to their payrolls and raised purchasing activity at the quickest rates since February. Business confidence reached a six-month high, as firms became more optimistic regarding future output. Inflationary pressures remained relatively muted, despite a pick up in the rate of input cost inflation.

The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.3 in July, up from 52.0 in June to signal a further improvement in the health of the sector. Notably, the latest improvement in operating conditions was solid and the strongest in four months.

Production at US manufacturers increased for the fourteenth month running in July. The pace of expansion accelerated from that seen in June to a solid rate. Panellists commonly attributed the upturn to higher client demand.

New orders received by US manufacturing firms grew at a solid pace, recovering from the nine- month low seen in June. A number of respondents noted that the expansion in new business was due to larger client bases and an increased willingness to spend. That said, orders from abroad decreased for the first time in ten months, albeit only slightly.

Backlogs of work fell for the third month running in July. Respondents commonly stated that outstanding business had decreased due to job creation and efficiencies made in the production process. Notably, the latest expansion in staffing levels was the strongest in five months.

In line with greater production schedules, firms increased their purchasing activity and to the greatest extent in five months. At the same time, companies signalled higher inventories of both post- and pre-production items in July. Stock building was generally linked to increased output and greater client demand. However, stronger demand for inputs and stock shortages at vendors led to a further lengthening in average delivery times.

Business confidence among US manufacturing firms improved to a six-month high in July. Stronger optimism was generally linked to more encouraging market conditions and stronger client demand.

Average input costs rose at a modest pace in July. Anecdotal evidence linked input price inflation to higher component costs and supplier shortages. Meanwhile, average prices charged by US manufacturing firms increased at a modest pace.

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

“The second half of the year got off to a good start for US manufacturers, with the health of the sector improving at the fastest rate for four months. Output, new orders, employment and buying activity all grew at increased rates. The only real blot on the copybook was a decline in exports for the first time since last September.

“However, although rising, the survey indices remain consistent with only very modest increases in comparable official data such as manufacturing output, durable goods orders and payroll numbers. Clearly the manufacturing sector remains stuck in a low gear, though is at least gaining momentum and will hopefully shift up a gear as we move through the second half of the year if demand continues to improve. IHS Markit expects GDP growth to accelerate to a near 3% annualised rate in the third quarter, fueled by gains in consumer spending and business investment, which should benefit manufacturing.””

IHS Markit, “Manufacturing PMI. Jul 2017“, 1 Aug 2017 (09:45) More

Global: JPMorgan Global Manufacturing PMI. Jul 2017

Press Release Extract [ser_global_pmi]

The global manufacturing sector forged ahead in July, registering a further month of improved business conditions. Although output growth slowed to a ten-month low, the pace of expansion in new orders strengthened.


At 52.7 in July, up from 52.6 in June, the J.P.Morgan Global Manufacturing PMI™ – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – signalled an improvement in operating performance for the seventeenth month in a row. The rate of expansion picked up to the fastest since April, but remained milder than at the start of the year.

Growth was again mainly led by European nations, while Asia continued to struggle in comparison. Eight of the ten best-performing countries were located in Europe, with Canada (fourth position) and Australia (tenth) the only other nations to break into the highest rankings.
European nations tended to benefit from strong inflows of new export business. The fastest rates of increase in foreign demand were seen in Germany, the UK, the Netherlands, Austria, Spain and France.

Around half of the Asian nations covered by the survey registered a contraction in July, including India, South Korea, Indonesia, Malaysia, Thailand and Myanmar. Growth gathered pace in China (despite remaining marginal), but slowed in Japan, Vietnam and the Philippines. Only Taiwan registered both a solid and accelerated rate of expansion in this region.

The US was in fourteenth position, despite seeing its PMI rise to a four-month high to signal a solid manufacturing sector upturn. Meanwhile, Brazil stagnated following three consecutive months of expansion.

Global manufacturing employment increased for the eleventh successive month in July, with the rate of jobs growth slightly above the average for this sequence. Among the largest industrial nations, staffing levels were raised in the US, in all of the euro area countries covered by the survey, Japan, the UK, Taiwan and South Korea. Cuts were registered in Brazil, Russia, India and China.

Input cost inflation accelerated for the first time in six months during July. This was partly due to supply chains being stretched by the sustained steady expansion of the global manufacturing sector so far this year. Average vendor lead times lengthened to the greatest extent in over six years during the latest survey month.

Part of the increase in costs was passed on to clients in the form of higher charges. Subsequently, average output prices rose for the sixteenth successive month and at the fastest rate since April.

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

“The global manufacturing sector achieved further solid and steady growth during July. Although the rate of output expansion eased slightly, stronger inflows of new business and rising workforce numbers suggest that the current pace of increase should be broadly sustained going forward. Cost pressures saw a slight move higher though, as sustained growth stretched global supply chains and led to increased raw material prices.”

J.P.Morgan and IHS Markit in association with ISM and IFPSM, “JPMorgan Global Manufacturing PMI. Jul 2017“, 1 Aug 2017 (11:00) More

flag_japan Japan update

Nikkei Japan Manufacturing PMI. Jul 2017

Press Release Extract [ser_jp_pmi]

Key points:

  • Slower gains in output and new orders recorded
  • Rise in demand for high-tech manufactures offset in part by weaker rise in exports
  • Optimism regarding future output hits series record high


Growth of the Japanese manufacturing sector was sustained at a modest rate during July, supported by further gains in output, new orders and employment. However, in each case, rates of expansion were lower than seen in June, whilst export trade rose at the weakest pace in nearly a year.

On the price front, output charges increased marginally, whilst input costs continued to increase at a noticeable pace. Nonetheless, optimism improved to its highest level in over five years of data collection, amid positive projections for demand, planned new product launches and preparations for the 2020 Tokyo Olympics.

The headline Japan Manufacturing Purchasing Managers’ Index™ (PMI)® – a composite single- figure indicator of manufacturing performance – recorded 52.1 in July. This marks the eleventh month of improvement in operating conditions within the Japanese manufacturing sector although, having fallen from 52.4 in June, growth was the slowest since last November.

Latest data again showed concurrent increases in both output and new orders. As was the case with the PMI, rates of expansion were a little lower than in June, easing to modest levels. Whilst demand for high-tech products was reported to be firm, there was evidence that overseas orders had faltered somewhat. Latest data showed that new export orders rose for an eleventh month running, but at the weakest pace in this sequence.

Backlogs of work outstanding were reduced during July as companies were comfortably able to deal with the dual requirements of both incoming and existing orders. July marked the first time since January that work outstanding had fallen.

Extended capacity enabled companies to keep on top of workloads, as signalled by a twenty-second successive monthly rise in staffing levels. Growth was again solid, albeit the weakest since the start of the year. Higher production requirements and staffing shortages supported the rise in employment.

Meanwhile, operating costs increased for a ninth successive month. Inflation was slightly lower, but remained marked amid reports of a general increase in raw material prices linked in part to supply shortages at vendors. This was further highlighted by the greatest deterioration in delivery times for over five-and-a-half years. High-tech items in particular were noted as being short in supply due to strong global demand. Purchasing activity amongst Japanese manufacturers rose for a ninth month in a row according to the latest data.

Although reduced new order growth has led to a slower expansion of firms’ productive capacity and output, optimism among Japanese manufacturers remained strong. In July, the Future Output Index reached a series-record high. Respondents highlighted the potential for new business related to the 2020 Tokyo Olympics, new product launches and expected general firmer demand as the main factors behind their optimism.

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

“The expansion of the Japanese manufacturing sector was undermined somewhat during July by a slump in new export order growth, which led to the lowest rises in both output and new orders since the final few months of last year.

“Moreover, sectoral growth was further impacted by ongoing marked deteriorations in delivery times, which deteriorated to the greatest extent for over five-and-a-half years.

“However, sentiment reached its highest level in over five years of data collection and, combined with ongoing rises in staffing levels, provides some reassurance that growth should be sustained in the coming months.”

IHS Markit, “Nikkei Japan Manufacturing PMI. Jul 2017“, 1 Aug 2017 More

Currency: USD/JPY

JPY movements
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: Nikkei 225

N225 movements
^ Nikkei N225 movements over the past week Chart: Google Finance

flag_china China update

Caixin China General Manufacturing PMI. Jul 2017

Press Release Extract [ser_cn_pmi]

Key Points:

  • Output and total new orders expand at fastest rates since February
  • New export sales increase at second-fastest rate for nearly three years
  • Input price inflation accelerates to solid pace


Operating conditions faced by Chinese manufacturers improved at a slightly quicker pace in July. Companies indicated that both output and new orders rose at the fastest rates for five months, helped by a solid upturn in new export sales. At the same time, inflationary pressures ticked up, with both input prices and output charges rising at faster rates than in June. However, companies maintained a relatively cautious stance towards employment, with staff numbers falling again in July. This coincided with a subdued level of confidence towards the business outlook, with optimism towards the year ahead dipping to an 11-month low.

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 above the neutral 50.0 value at 51.1 in July, up from 50.4 in June. This signalled an improvement in the health of China’s manufacturing sector for the second successive month, following a slight deterioration in May. Though marginal, the pace of improvement was the strongest seen for four months.

The uptick in the headline index was supported by a solid and accelerated increase in total new business. Furthermore, the rate of new order growth picked up to a five-month high in July. Panellists widely commented on an improvement in market conditions and strong foreign demand. Notably, new export sales increased at the second-fastest rate since September 2014.

In order to help meet greater client demand, companies raised output again in July. As was the case for new business, the rate of expansion was the strongest seen since February.

Although production and new orders increased, firms continued to adopt a relatively cautious approach to employment, with workforce numbers declining again in July. Furthermore, the rate of job shedding was the quickest seen for ten months. As a result, backlogs of work continued to increase and at a modest pace that was similar to that seen in June.

Chinese manufacturers raised their purchasing activity for the second month running, and at a quicker rate than in June. This contributed to a renewed increase in stocks of inputs, albeit marginal. A number of companies mentioned rebuilding their inventories due to stronger client demand. Meanwhile, stocks of finished items declined slightly, as some firms commented on using current inventories to fulfil new orders.

Average input costs increased at a solid pace that was the fastest for four months in July. A number of firms commented on greater raw material prices. As a result, companies raised their prices charged for the second successive month and at a faster rate than in June.

Optimism towards the 12-month business outlook weakened slightly in July. Notably, the degree of confidence dipped to its lowest since August 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 rose 0.7 points to 51.1 in July, the highest reading in four months. The sub-indices of output and new orders both rebounded further from May’s recent lows. The sub-indices of input costs and output prices both continued to rise to hit four-month highs. Although the sub-index measuring stocks of finished goods remained in contraction territory and slid further, the sub-index showing quantity of purchases indicated the strongest rise in buying activity for five months, pointing to moderate growth in manufacturing production going forward. Operating conditions in the manufacturing sector improved further in July, suggesting the economy’s growth momentum will be sustained. That said, it’s unlikely that financial regulatory tightening will be relaxed.”

IHS Markit, “Caixin China General Manufacturing PMI. Jul 2017“, 1 Aug 2017 More

Currency: USD/CNY

CNY movements
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

Stockmarket: CSI300

CSI300 movements
^ Shanghai CSI300 movements over the past week Chart: Google Finance