In Portfolioticker today
- Today at the stock market
- The portfolio today
- Energy: Oil and Gas Futures
- AU: Balance of Payments and International Investment Position, Q2/2017
- AU: Government Finance Statistics. Jun 2017
- AU: Commonwealth Bank Services PMI. Aug 2017
- AU: RBA Monetary Policy Decision
- EU: Retail Trade. Jul 2017
- EU: Eurozone Composite PMI® (Includes IHS Markit Eurozone Services PMI®). Aug 2017
- US: Full Report on Manufacturers’ Shipments, Inventories and Orders. Jul 2017
- US: Category 5 Hurricane Irma Threatens Florida
- Japan Update
- China Update
Today at the stock market
“U.S. stocks sank on Tuesday, with the S&P 500 stumbling to its biggest single-day loss in about three weeks, as investors weighed fresh tensions with North Korea. North Korea on Sunday conducted its sixth nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, marking a dramatic escalation of the regime’s stand-off with the United States and its allies.
With U.S. markets closed on Monday for the Labor Day holiday, Tuesday marked the first regular trading since the geopolitical developments.
- The S&P 500 lost 18.7 points, or 0.76%, to 2,457.85.
- The Dow Jones Industrial Average fell 234.25 points, or 1.07%, to 21,753.31
- The Nasdaq Composite dropped 59.76 points, or 0.93%, to 6,375.57.
- The CBOE Volatility index .VIX, the most widely followed barometer of expected near-term stock market volatility, rose 2.10 points to 12.23.
- Declining issues outnumbered advancing ones on the NYSE by a 2.34-to-1 ratio; on Nasdaq, a 2.14-to-1 ratio favored decliners.
“North Korea seems to be what gets the biggest reaction, at least over the last month or two. It’s basically just a risk-off day … There is no data, no earnings, nothing really fundamental to move the market today, so it sells off when there’s a scary headline again,” said Aaron Jett, vice president for global equity research at Bel Air Investment Advisors in Los Angeles.
Wall Street may face a bumpy road in September, typically the worst month for stocks, if there is a showdown in Washington over the U.S. budget and the federal debt ceiling.
Investor nerves on Tuesday may have been heightened by news of a powerful storm heading to the southern United States closely on the heels of devastation in Texas from Hurricane Harvey.
Shares in home insurers with exposure to Florida tumbled as investors braced for losses as Hurricane Irma appeared set to hit the state.” Reuters
^ Market indices today (mouseover for 12 month view) Chart: Google Finance
|Index||Ticker||Today||Change||31 Dec 16||YTD|
|S&P 500||SPX (INX)||2,457.85||-0.76%||2,238.83||+9.78%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 16||YTD|
Portfolio stock prices
|Stock||Ticker||Today||Change||31 Dec 16||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The Bloomberg Dollar Spot Index (DXY) fell 0.3% to 1,147.87, the lowest in more than two years.
The EUR rose 0.2% to $1.1914.
Britain’s GBP rose 0.8% to $1.303, the biggest jump in over 7 weeks.
Japan’s JPY climbed 0.8% to 108.87 per USD, the strongest in almost 20 weeks.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
Prices are as at 15:48 EDT
- NYMEX West Texas Intermediate (WTI): $48.61/barrel +2.79% Chart
- ICE (London) Brent North Sea Crude: $53.24/barrel +1.72% Chart
- NYMEX Natural gas futures: $2.98/MMBTU -3.09 Chart
AU: Balance of Payments and International Investment Position, Q2/2017
Press Release Extract [ser_abs]
“Lower export commodity prices contributed to the widening of the current account deficit in the June quarter 2017, according to latest figures from the Australian Bureau of Statistics (ABS).
JUNE QUARTER KEY FIGURES Q1/2017 Q2/2017 Change Balance on Current Account Trend estimates -$5.373bn -$5.623bn -5% Seasonally adjusted -$4.754bn -$9.562bn -101% Balance on Goods and Services Trend estimates +$6.087bn +$7.139bn +17% Seasonally adjusted +$7.403bn +$3.070bn -59% Net Primary Income Trend estimates -$10.991bn -$12.283bn -12% Seasonally adjusted -$11.660bn -$12.159bn -4% Levels at End of Period International Investment Position $1,024.609bn -$1,000.264bn -2% Net Foreign Equity +$12.854bn +$9.665bn -25% Net Foreign Debt +$1,011.765bn +$990.599bn -2%
Balance of Payments:
- The current account deficit, seasonally adjusted, rose $4,808m to $9,562m in the June quarter 2017. There was a fall of $4,333m on the balance on goods and services, resulting in a surplus of $3,070m in the June quarter 2017. The primary income deficit rose $499m to $12,159m.
- In seasonally adjusted chain volume terms, the deficit on goods and services fell $1,363m from $1,559m in the March quarter 2017 to $196m in the June quarter 2017. This is expected to contribute 0.3 percentage points to growth in the June quarter 2017 volume measure of GDP.
International Investment Position (IIP)
- Australia’s net IIP liability position was $1,000.3b at 30 June 2017, a decrease of $24.4b (2%) on the revised 31 March 2017 position of $1,024.6b.
- Australia’s net foreign debt liability decreased $21.2b (2%) to $990.6b. Australia’s net foreign equity liability decreased $3.2b (25%) to $9.7b at 30 June 2017.
The seasonally adjusted current account deficit rose $4,808 million to $9,562 million in the June quarter 2017. In seasonally adjusted terms, the balance on goods and services surplus in the June quarter 2017 was $3,070 million. Exports of goods and services fell $2,693 million (3 per cent) and imports of goods and services rose $1,640 million (2 per cent). The primary income deficit widened $499 million.
In volume terms, exports grew faster than imports this quarter and as a result international trade is expected to contribute 0.3 percentage points to growth in the June quarter 2017 Gross Domestic Product. In seasonally adjusted chain volume terms, the balance on goods and services deficit decreased $1,363 million to a deficit of $196 million.
Australia’s net international investment position was a liability of $1,000.3b at 30 June 2017, a decrease of $24.4 billion (2 per cent) on the revised 31 March 2017 position of $1,024.6 billion.
Australia’s net foreign debt liability decreased $21.2 billion (2 per cent) to a net liability position of $990.6 billion. Australia’s net foreign equity liability decreased $3.2 billion (25 per cent) to a net liability position of $9.7 billion at 30 June 2017.
Terms of Trade
Australia’s seasonally adjusted terms of trade on net goods and services for the June quarter 2017 fell 6.0% to 103.6, with a decrease of 5.4% in the implicit price deflator (IPD) for goods and services credits and an increase of 0.7% in the IPD for goods and services debits.
In trend terms, the terms of trade for net goods and services rose 2.0% to 108.9.
Selected Debits (Imports)
Imports of consumption goods, in seasonally adjusted terms at current prices, rose $335m (1%) to $25,062m, with volumes up 2%. The main components contributing to the rise were:
- non-industrial transport equipment, up $159m (3%), with volumes up 2% and prices up 1%
- textiles, clothing and footwear, up $149m (3%), with volumes up 4%
- toys, books and leisure goods, up $77m (5%), with volumes up 4% and prices up 1%.
Imports of capital goods, in seasonally adjusted terms at current prices, rose $746m (4%) to $17,951m, with volumes up 3% and prices up 1%.
The main components contributing to the rise were:
- machinery and industrial equipment, up $311m (6%), with volumes up 5% and prices up 1%
- capital goods n.e.s., up $235m (6%), with prices up 6%
- civil aircraft and confidentialised items, up $232m (38%), with volumes up 37% and prices up 1%.
Imports of intermediate and other merchandise goods, in seasonally adjusted terms at current prices, rose $323m (1%) to $27,527m, with volumes up 2%. The main component contributing to the rise was processed industrial supplies n.e.s., up $325m (4%), with volumes up 3% and prices up 1%.
The trend estimate of net services at current prices was a deficit of $492m, a rise of $129m on the March quarter 2017 deficit of $363m. In seasonally adjusted terms at current prices, net services was a deficit of $563m, a rise of $224m on the March quarter 2017 deficit of $339m.“
Australian Bureau of Statistics, “5302.0 – Balance of Payments and International Investment Position, Australia, Jun 2017“, 5 Sep 2017 More
AU: Government Finance Statistics. Jun 2017
Press Release Extract [ser_abs2]
“In the June quarter 2017:
- Taxation revenue increased by 10.8% from $121,778m in the March quarter 2017 to $134,883m in the June quarter 2017.
- General government sector revenue exceeded expenses resulting in a GFS net operating balance of $7,792m.
- The GFS net lending(+)/borrowing(-) position for the general government sector was -$5,579m.
In seasonally adjusted chain volume terms in the June quarter 2017:
- Total general government final consumption expenditure increased by $946m, a rise of 1.2% compared with the March quarter 2017.
- Total general government gross fixed capital formation increased by $2,984m, a rise of 19.7% compared with the March quarter 2017.
- Total public corporations gross fixed capital formation decreased by $481m, a drop of 8.1% compared with the March quarter 2017.“
Australian Bureau of Statistics, “5519.0.55.001 – Government Finance Statistics, Australia, Jun 2017“, 5 Sep 2017 More
AU: CBA Services PMI. Aug 2017
Press Release Extract [ser_cba_psi]
“Activity levels in the Australian service sector continued to rise in August, but at the slowest rate since the start of 2017 as new business growth also weakened. However, companies continued to add to their workforce numbers at a noticeable rate, which enabled them to broadly keep on top of their workloads. Latest data showed operating costs continuing to increase, which led to the strongest rise in output prices recorded by the survey since July 2016.
The headline figure derived from the survey is the Commonwealth Bank Australia Services Business Activity Index, which is designed to provide timely indications of changes in business activity in the Australian service sector. Readings above 50.0 signal an improvement in business activity on the previous month while readings below 50.0 show deterioration.
August’s seasonally adjusted Business Activity Index dropped to a level of 54.2, down from 57.0 in July. Although indicative of a solid expansion of the sector that maintained the trend of rising activity seen throughout the survey history to date, the latest index reading was the lowest recorded since January.
The weaker increase in activity was linked in part to slower growth of incoming new business. Whilst companies continued to indicate that the economic climate remained broadly positive, which enabled them to secure new contracts, the rate of growth in new work was the slowest recorded by the survey to date.
Service providers continued to add to their workforce numbers during August, in line with the trend seen throughout the survey history. The rate of growth also matched July’s three-month high as firms responded to increased bookings, higher enquiries and further gains in new work by boosting employment.
Whilst enabling companies in the main to keep on top of overall workloads – backlogs of work were up only slightly in August – higher employment was also reported to have pushed up average operating costs for service providers. The latest survey data showed operating expenses rising sharply and at a pace that was only slightly lower than July’s survey high.
Pressure on margins subsequently encouraged firms to raise their own charges during the month. The result was the strongest increase in average output charges recorded by the survey since July 2016.
Finally, despite slipping to a three-month low, business confidence amongst Australian service providers remained high. Client demand is expected to improve further in the next 12 months, underpinned by organic market growth, the planned introduction of new product ranges and improved marketing.
Commenting on the Commonwealth Bank Services and Composite PMI data, Gareth Aird, Senior Economist at the Commonwealth Bank, said:
‘Australia’s services sector is in good health. Employment growth, in particular, is indicative of expansion in the sector. The pullback in the headline index is a little disappointing, but the broader trends remain encouraging. The sharp
lift in operating expenses is being offset by an increase in prices charged. This suggests that demand growth has picked up. And it should exert some upward pressure on the inflation pulse of the economy.’“
Commonwealth Bank of Australia, “Slower service sector growth signalled in August.“, 5 Sep 2017 More
AU: RBA Monetary Policy Decision
Press Release Extract [ser_rba]
“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 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 risen recently, although Australia’s terms of trade are still expected to decline over coming years.
Wage growth remains low 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 recent data have been consistent with the Bank’s expectation that growth in the Australian economy will gradually pick up over the coming year. The decline in mining investment will soon run its course. The outlook for non-mining investment has improved recently and reported business conditions are at a high level. Residential construction activity remains at a high level, but little further growth is expected. Retail sales have picked up recently, although slow growth in real wages and high levels of household debt are likely to constrain future growth in spending.
Employment growth has been stronger over recent months and has increased in all states. The various forward-looking indicators point to solid growth in employment over the period ahead. The unemployment rate is expected to decline a little over the next couple of years.
Wage growth remains low. This is likely to continue for a while yet, although stronger conditions in the labour market should see some lift in wages growth over time. Inflation also remains low and is expected to pick up gradually as the economy strengthens.
The Australian dollar has appreciated over recent months, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to the 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 continue to vary considerably around the country. Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney. 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 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, “Statement by Philip Lowe, Governor: Monetary Policy Decision“, 5 Sep 2017 More
EU: Retail Trade. Jul 2017
Press Release Extract [ser_eu_retail]
“In July 2017 compared with June 2017, the seasonally adjusted volume of retail trade fell by 0.3% in the euro area (EA19) and by 0.2% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In June, the retail trade volume increased by 0.6% in the euro area and by 0.5% in the EU28.
In July 2017 compared with July 2016, the calendar adjusted retail sales index increased by 2.6% in the euro area and by 2.7% in the EU28.
Monthly comparison by retail sector and by Member State
The 0.3% decrease in the volume of retail trade in the euro area in July 2017, compared with June 2017, is due to falls of 0.9% for automotive fuel and of 0.5% for “Food, drinks and tobacco”, while non-food products rose by 0.1%. In the EU28, the 0.2% fall in the volume of retail trade is due to decreases of 0.6% for automotive fuel and of 0.2% for “Food, drinks and tobacco”, while non-food products remained stable.
Among Member States for which data are available, the largest decreases in the total retail trade volume were registered in Germany (-1.2%), Croatia (-1.1%), Estonia and Austria (both -1.0%), while the highest increases were observed in Slovenia (+1.4%), Romania and Sweden (both +1.2%).
Annual comparison by retail sector and by Member State
The 2.6% increase in the volume of retail trade in the euro area in July 2017, compared with July 2016, is due to rises of 3.9% for non-food products, of 1.5% for “Food, drinks and tobacco” and of 0.8% for automotive fuel. In the EU28, the 2.7% increase in retail trade volume is due to rises of 4.0% for non-food products, of 1.4% for “Food,
drinks and tobacco” and of 1.2% for automotive fuel.
Among Member States for which data are available, the highest increases in the total retail trade volume were registered in Slovenia (+10.0%), Romania (8.8%) and Poland (+7.9%), while a decrease was observed in Belgium (-1.0%).“
Eurostat, “July 2017 compared with June 2017: Volume of retail trade down by 0.3% in euro area, Down by 0.2% in EU28“, 5 Sep 2017 More
Markit Eurozone Composite PMI. Aug 2017
- Final Eurozone Composite Output Index: 55.7 (Flash: 55.8, July Final: 55.7)
- Final Eurozone Services Business Activity Index: 54.7 (Flash: 54.9, July Final: 55.4)
Eurozone economic growth remained solid and steady in August. This was signalled by the final IHS Markit Eurozone PMI® Composite Output Index matching July’s reading of 55.7, down only marginally from the flash estimate of 55.8.
On current trend, output growth so far in the third quarter is slightly below its second quarter high, but remains among the best seen over the past seven years. August saw a strong expansion of manufacturing production, with the pace of increase regaining most of the momentum ceded in July. Service sector activity growth eased to a seven month low, but remained above its long-term trend.
Germany and Ireland were the only nations covered by the survey to see output growth accelerate in August. Ireland registered strong increases in both manufacturing output and services activity, whereas growth was less evenly distributed in Germany. The German manufacturing sector saw a robust increase in production volumes – among the best since early-2011 – whereas growth in services activity was the weakest of the five nations covered. Although rates of economic expansion eased in France, Italy and Spain, they remained solid.
Underlying the continued expansion of eurozone output was a further solid increase in new business, albeit the weakest in seven months. This in turn led to rising backlogs of work, which firms across the currency union responded to by increasing employment.
Jobs growth was registered for the thirty-fourth month running and, although slower than in July, remained among the best seen over the past decade. Job creation was strongest in Ireland, Spain and Germany, while comparatively modest increases were seen in France and Italy. Only Spain recorded a sharper pace of expansion.
Price pressures accelerated in August, with rates of increase in output charges and input costs both hitting three-month highs. However, the pace of inflation remained below peaks seen earlier in the year in both cases.
Business optimism continued to ease from May’s record high in August. The degree of positivity was the lowest during the year-to-date, but solid overall.
The rate of expansion in euro area service sector activity eased to a seven-month low in August. At 54.7, down from 55.4 in July, the final IHS Markit Eurozone PMI® Services Business Activity Index was slightly below the earlier flash estimate of 54.9.
The rate of output growth was still among the best seen over the past six years, however, as service sector companies again benefited from increasing inflows of new business. Although the rate of expansion in new work also slowed to a seven- month low, it similarly remained above its long-run trend.
Service sector activity increased in all of the nations covered by the survey. The strongest expansion was registered in Ireland, where growth accelerated to a three-month high. Rates of increase slowed in France, Italy and Spain, but remained above their respective series averages in all three cases.
Germany was the only other nation apart from Ireland to see growth accelerate. However, this mild pick-up was insufficient to move Germany off of the bottom of the euro service sector PMI growth rankings.
Higher intakes of new business at eurozone service providers led to a further increase in backlogs of work, the fifteenth in as many months. A solid pipeline of new work was also a major factor underlying continued business confidence, despite the degree of optimism slipping slightly to its lowest since November last year.
Job creation also slowed slightly in August. Although the pace of increase remained solid, it was the weakest since January. Germany, France, Italy and Ireland all saw their respective rates of expansion slow during the latest survey month. In contrast, jobs growth in Spain accelerated to its highest in over a decade (best since March 2007).
Price pressures ticked higher in August, with rates of inflation in input costs and output charges both accelerating to three-month highs. Service charges have now risen for ten successive months, while the current sequence of increasing costs was extended to 93 consecutive months.
Comment: Chris Williamson, Chief Business Economist at IHS Markit said:
‘The summer months have seen eurozone economic growth moderate only slightly from the rapid pace seen in the spring. The solid PMI readings for July and August set the scene for another strong GDP number for the third quarter, with the surveys running at a level historically consistent with 0.6% growth.
‘With such robust growth being sustained into August, the region is on course to see GDP rise by 2.1% in 2017, which would represent the best performance since 2007.
‘There’s good reason to be optimistic that the current spurt growth has further to run: forward- looking indicators such as new order inflows and future expectations have dipped to levels seen back at the turn of the year, but remain sufficiently elevated to suggest that any potential slowdown in growth in coming months will be only very modest.
‘Employment growth has likewise cooled somewhat but remains strong, suggesting eurozone unemployment will continue to edge lower, helping support consumer confidence and spending.
‘The survey data also highlight how price pressures have meanwhile edged higher alongside the strong economic upturn, adding to the perception that the ECB will soon announce its intention to taper its stimulus in 2018 if conditions remain supportive, most likely at its October policy meeting.’“
IHS Markit, “IHS Markit Eurozone Composite PMI® – final data (Includes IHS Markit Eurozone Services PMI®) – Strong manufacturing sector underpins solid growth of euro area economy“, 5 Sep 2017 More
US: Full Report on Manufacturers’ Shipments, Inventories and Orders. Jul 2017
Press Comment: Bloomberg
“New orders for U.S.-made goods recorded their biggest drop in nearly 3 years in Jul 2017, but orders for capital goods were stronger than previously reported, pointing to a faster pace of business spending at the start of Q3/2017.
Factory goods orders fell 3.3% amid a slump in demand for transportation equipment, the Commerce Department said on Tuesday. That was the biggest drop since Aug 2014. June’s data was revised to show orders rising 3.2% instead of the previously reported 3.0% surge.
July’s fall in factory orders was in line with economists’ expectations. Manufacturing, which makes up about 12% of the U.S. economy, is strengthening even as motor vehicle production has declined and the boost from oil and gas drilling is starting to fade as ample supplies restrain crude oil prices.
The USD was trading lower versus a basket of currencies, while prices for U.S. Treasuries rose slightly. Tuesday’s report also showed orders for non-defense capital goods excluding aircraft – seen as a measure of business spending plans – rose 1.0% in Jul 2017 instead of gaining 0.4% as reported last month.
Orders for these so-called core capital goods fell 0.1% in Jun 2017. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 1.2% in Jul 2017 instead of the previously reported 1.0% rise.
The surge in shipments suggests that business spending on equipment strengthened further early in Q3/2017. Business investment on equipment rose at an 8.8% annualized rate in Q2/2017, the fastest pace since Q3/2015.
In Jul 2017, orders for computers and electronic products rose 2.1%, the biggest gain in a year. Orders for electrical equipment, appliances and components rose 2.6%, also the largest increase in a year.
Machinery orders, however, fell 0.9%. That was the largest fell in 9 months and followed a 0.5% gain in Jun 2017. Orders for industrial machinery fell 0.8%.
Mining, oil field and gas field machinery orders rose 1.7% after rising 2.5% in Jun 2017. Demand is slowing as oil prices have dipped below $50/barrel. Oil rigs in operation are hovering near a 2-month low.
Orders for transportation equipment fell 19.2%, the biggest drop since Aug 2014. That reflected a 70.8% fall in civilian aircraft orders. Boeing has reported on its website that it received only 22 aircraft orders in Jul 2017, sharply down from 184 in Jun 2017.
Motor vehicle orders fell 0.9% after being unchanged in Jun 2017. Auto sales peaked in Dec 2016, leading to a slump in motor vehicle production as manufacturers work to reduce an inventory overhang. Production could get a boost from an anticipated spike in demand for automobiles as residents in storm-ravaged Texas replace flood-damaged vehicles.
In Jul 2017, unfilled orders at factories fell 0.3% after rising 1.3% in Jun 2017. Manufacturing inventories rose 0.2% while shipments rose 0.3%. As a result, the inventories-to-shipments ratio fell to 1.37 from 1.38 in Jun 2017.” Reuters
Press Release Extract [ser_us_durables]
New orders for manufactured goods in July, down three of the last four months, decreased $15.8 billion or 3.3 percent to $466.4 billion, the U.S. Census Bureau reported today. This followed a 3.2 percent June increase. Shipments, up seven of the last eight months, increased $1.6 billion or 0.3 percent to $474.3 billion. This followed a 0.1 percent June increase. Unfilled orders, down two of the last three months, decreased $3.6 billion or 0.3 percent to $1,131.9 billion. This followed a 1.3 percent June increase. The unfilled orders-to-shipments ratio was 6.75, down from 6.82 in June. Inventories, up eight of the last nine months, increased $1.4 billion or 0.2 percent to $651.6 billion. This followed a 0.3 percent June increase. The inventories-to-shipments ratio was 1.37, down from 1.38 in June.
New orders for manufactured durable goods in July, down three of the last four months, decreased $16.8 billion or 6.8 percent to $228.9 billion, virtually unchanged from the previously published decrease. This followed a 6.4 percent June increase. Transportation equipment, also down three of the last four months, drove the decrease, $17.6 billion or 19.2 percent to $74.1 billion. New orders for manufactured nondurable goods increased $1.0 billion or 0.4 percent to $237.4 billion.
Shipments of manufactured durable goods in July, up two of the last three months, increased $0.6 billion or 0.2 percent to $236.9 billion, down from the previously published 0.4 percent increase. This followed a virtually unchanged June decrease. Computers and electronic products, up three consecutive months, led the increase, $0.3 billion or 1.0 percent to $26.9 billion. Shipments of manufactured nondurable goods, up three of the last four months, increased $1.0 billion or 0.4 percent to $237.4 billion. This followed a 0.2 percent June increase. Petroleum and coal products, up following five consecutive monthly decreases, led the increase, $0.9 billion or 2.2 percent to $41.3 billion.
Unfilled orders for manufactured durable goods in July, down two of the last three months, decreased $3.6 billion or 0.3 percent to $1,131.9 billion, virtually unchanged from the previously published decrease. This followed a 1.3 percent June increase. Transportation equipment, also down two of the last three months, drove the decrease, $4.8 billion or 0.6 percent to $772.2 billion.
Inventories of manufactured durable goods in July, up twelve of the last thirteen months, increased $1.3 billion or 0.3 percent to $398.7 billion, virtually unchanged from the previously published increase. This followed a 0.5 percent June increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $0.5 billion or 0.4 percent to $129.6 billion. Inventories of manufactured nondurable goods, up two consecutive months, increased $0.2 billion or 0.1 percent to $252.8 billion. This followed a 0.1 percent June increase. Petroleum and coal products, up following four consecutive monthly decreases, drove the increase, $0.3 billion or 0.8 percent to $34.5 billion. By stage of fabrication, July materials and supplies increased 0.1 percent in durable goods and decreased 0.1 percent in nondurable goods. Work in process was virtually unchanged in durable goods and increased 1.8 percent in nondurable goods. Finished goods increased 0.9 percent in durable goods and decreased 0.6 percent in nondurable goods.”
US Census Bureau, “Full Report on Manufacturers’ Shipments, Inventories and Orders. Jul 2017“, 5 Sep 2017 (10:00) More
US: Category 5 Hurricane Irma Threatens Florida
“Category 5 hurricane Irma has topped the 5-step Saffir Simpson scale that measures storm strength as the “extremely dangerous” system churns toward Florida with the prospect of property losses that could surpass Hurricane Katrina.
Insurance stocks were the biggest decliners in the S&P 500 Index, as Barclays Plc estimated losses in a worst-case scenario at $130 billion. Airlines have canceled flights across the Caribbean and are adding planes to evacuate tourists, and cruise-line stocks slumped. Florida declared a state of emergency and may begin to feel Irma’s potentially deadly winds as early as Saturday 9 Aug 2017.
Irma comes on the heels of Hurricane Harvey, which smashed ashore in Texas on 25 Aug 2017 causing widespread damage, power outages and flooding and taking almost a fifth of U.S. oil refining capacity offline. On its current path, Irma is a bigger threat to agriculture, with orange juice futures surging.
“It is not the strongest, but it is in the upper pantheon. If you have an evacuation drill, now is the time to practice it,” said Phil Klotzbach, a hurricane researcher at Colorado State University.” Bloomberg
Nikkei Japan Services PSI. Aug 2017
Expansion of the Japanese service sector was sustained in August for an eleventh successive month, albeit at a slower rate. The weaker gain in activity was linked to a similar slowdown in new order growth, which also undermined business expectations. Confidence was the lowest recorded by the survey for over a year.
Nonetheless, rising backlogs of work encouraged the further expansion of employment, whilst firms increased their charges at the most notable rate since March. Input prices rose at a broadly similar rate to July.
The headline seasonally adjusted Business Activity Index recorded 51.6 in August to extend the current period of growth to 11 months. However, falling from 52.0 in July and down for a second successive month, the rate of growth signalled by the survey was moderate and the lowest recorded since February.
In contrast, there was an improvement in the rate of expansion in manufacturing output to a three-month high. That subsequently meant that the Nikkei Composite Output Index moved broadly sideways during August, registering a level of 51.9, up fractionally from July’s nine-month low of 51.8.
The ongoing expansion of service sector activity was again closely linked to rising levels of incoming new business. Growth of new work has now been recorded for 13 months in a row, although the latest increase was the slowest since April. There were several reports from panellists of increased competition limiting their gains in new work.
Meanwhile, manufacturers registered only a moderate rise in sales, with growth little changed since July. At the composite level, the rise in new orders was subsequently the lowest recorded by the survey for four months.
Although growth of incoming new business and activity both continued to weaken during August, pressure on service sector capacity persisted, with backlogs of work outstanding increasing for a ninth successive month. Companies were subsequently encouraged to add to their workforce numbers. Services employment rose moderately for an eighth consecutive survey period.
In the manufacturing sector, jobs were added at a solid pace, extending the current run of growth to a whole year.
Latest survey data showed that service sector input prices continued to increase, maintaining a trend that stretches back to November 2012. Labour costs were cited as a primary inflationary source by those panellists that recorded a rise in average operating expenses in August. Service sector companies sought to protect margins by passing on their higher costs to clients, as highlighted by the strongest increase in average output charges since March.
In the manufacturing sector, rates of input and output price inflation weakened compared to those seen in July.
Finally, business confidence regarding activity over the next 12 months remained positive during August, but eased since July to the lowest level in in over a year. Although a number of companies are expecting rising levels of new work to be maintained, several commented that competitive pressures and fears of weaker demand may undermine growth.
Commenting on the Japanese Services PMI survey data, Paul Smith, Director at IHS Markit, which compiles the survey, said:
‘Although growth of the service sector eased during August, wider expansion of the Japanese economy remains entrenched in a fairly decent growth range heading towards the final month of Q3. Subsequently firms remain confident enough to continue to add to their workforce numbers, and employment continues to rise nicely. However, a slide in service sector confidence to a 13-month low provides a little concern that growth could continue to falter in the near-term.’”
IHS Markit, “Nikkei Japan Services PMI® (with Composite PMI data) Weakest rise in service sector activity for six months“, 5 Sep 2017 More
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei N225 movements over the past week Chart: Google Finance
Caixin General Services PSI. Aug 2017
- Services activity growth strengthens to three-month high, while manufacturing output grows modestly
- New orders increase at faster pace at both service providers and goods producers
- Inflationary pressures build further
Summary – Services and Composite PMI data
The Caixin China Composite PMI™ data (which covers both manufacturing and services) indicated that Chinese business activity growth picked up for the second month in a row during August. Furthermore, the latest expansion of activity was the strongest seen for six months, as shown by the Composite Output Index posting 52.4, up from 51.9 in July.
August data revealed that the latest expansion of overall business activity was underpinned by increased activity at both manufacturers and services providers. Notably, services companies registered the quickest upturn in business activity for three months. This was highlighted by the seasonally adjusted Caixin China General Services Business Activity Index rising from 51.5 in July to 52.7. At the same time, goods producers noted a further modest increase in output that was little-changed from that seen in the previous month.
In line with the trend for activity, growth in new business accelerated in the service sector midway through the third quarter. The latest increase in new work was the fastest seen in three months and solid overall, with a number of companies linking growth to improving market conditions and new marketing strategies. At the same time, new order intakes at manufacturers rose to the greatest extent in over three years. As a result, composite new business increased at the joint-quickest pace in 2017 to date.
Stronger growth of activity and new orders led service providers to expand their payrolls again in August. Notably, the rate of job creation was the fastest seen for four months. Meanwhile, manufacturers reported a further reduction in headcounts in the latest survey period, though the rate of job shedding moderated since July. At the composite level, employment stabilised in August, thereby ending a four-month sequence of decline.
Manufacturers and services companies in China both reported higher amounts of outstanding work during August that was in turn linked to greater new order intakes. That said, service providers saw only a marginal rate of backlog accumulation that was the weakest in four months. The level of work-in-hand (but not yet completed) at manufacturing firms increased at a pace that, though modest, was the quickest seen in the year to date. Consequently, unfinished workloads continued to rise modestly at the composite level.
Cost burdens continued to rise at a sharper pace at manufacturers than service providers in August. Notably, the rate of input price inflation at goods producers accelerated to five-month high, with a number of panellists commenting on higher raw material costs. In contrast, average input prices rose at a marginal pace at services firms that was one of the slowest seen over the past eight years. Subdued cost pressures at services companies did not offset the steeper increase in input costs at manufacturers, however, as shown by composite input costs rising to the greatest extent since March.
Prices charged by Chinese services firms declined during August amid reports of greater market competition. Though only marginal, it was the first time that prices had fallen for nearly a year-and-a-half. Manufacturers meanwhile increased their factory gate charges and at a solid rate. According to panellists, companies raised their selling prices due to greater cost burdens. At the composite level, prices charged increased at the steepest rate for five months.
After dipping in July, overall business confidence in China picked up slightly in August. The improvement was driven by stronger optimism across both the manufacturing and service sectors, with the latter expressing the most marked degree of positive sentiment.”
Commenting on the China General Services PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:
‘The Caixin China General Services Business Activity Index rose 1.2 points from July to 52.7 in August. The index of new business signalled a solid increase in workloads. Input costs increased only marginally while prices charged surprisingly fell to contraction territory. The Composite Output Index increased 0.5 points from July to 52.4, the highest reading since February. The recovery in both manufacturing and services has led the economic outlook to continue to improve. But we need to closely watch whether the recent rises in input costs will weigh on corporate profits and fuel inflation.’“
IHS Markit, “Caixin China General Services PMI™ – Chinese business activity expands at quickest pace for six months“, 5 Sep 2017 More
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ Shanghai CSI300 movements over the past week Chart: Google Finance