Fri 1 Dec 2017


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  • Today at the stock market Opinion
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  • flag_china China Update
  • Today at the stock market

    bull/bearWall Street fell on Friday, whipsawed by developments with a probe into Russia’s alleged involvement in the U.S. election as well as with progress on a tax bill in Congress.

    Major indexes ended lower after an ABC News report that former national security adviser Michael Flynn was prepared to testify that before taking office President Donald Trump had directed him to make contact with Russians.

    The benchmark S&P 500 was down as much as 1.6% following the report. Flynn pleaded guilty on Friday to lying to the FBI about contacts with Russia’s ambassador.Flynn Pleads Guilty Timeline

    But stocks recouped the bulk of their initial losses, after U.S. Senate Republicans said they had enough support to pass a sweeping tax overhaul. The Senate news was the latest sign of progress for a tax bill being closely watched by investors, with hopes that significant corporate tax cuts will further fuel Wall Street’s record-setting rally. Report

    • The S&P 500 index fell 5.36 points, or 0.20%, to 2,642.22
    • The Dow Jones Industrial Average fell 40.76 points, or 0.17%, to 24,231.59
    • The Nasdaq Composite index fell 26.39 points, or 0.38%, to 6,847.59.
    • Advancing issues outnumbered declining ones on the NYSE by a 1.02-to-1 ratio; on Nasdaq, a 1.54-to-1 ratio favored decliners.

    “This Flynn thing threw everything for a loop. We had that still against the backdrop of tax reform. We are at all-time highs so sometimes when you do get news that’s of a nature where people want to sell, it gets a little bit overdone,” said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

    Steep sell-offs have been a rarity on Wall Street this year. The S&P 500 has closed down by at least 1% only 4 times in 2017.

    Progress with the tax legislation in the Senate had helped buoy stocks this week, as well as drive a rotation into those areas that seem poised to benefit from lower corporate taxes.

    “We’ve kind of had a slow-growth economy in the last 18 to 24 months. The market piled into the faster-growing companies out there. Now we have an economy that’s accelerated in growth…A lot of the stocks that have been ignored in the last couple of years could become bargains,” said Gary Bradshaw, portfolio manager at Hodges Capital in Dallas.

    The S&P has rallied 18% this year, boosted by solid global economic data and strong U.S. corporate earnings. But with investors optimistic about some aspects of Trump’s domestic agenda, especially tax cuts, news involving his administration has periodically rattled markets.

    “We’ve kind of gotten used to the drama in the White House. Whether or not they prove that there are Russian relationship ties, that doesn’t have a long-term effect on the value of the stock market,” said Rob Stein, CEO of Astor Investment Management in Chicago.Reuters

    Market indices

    Market indices
    ^ Market indices today (mouseover for 12 month view) Chart: Google Finance

    Index Ticker Today Change 31 Dec 16 YTD
    S&P 500 SPX (INX) 2,642.22 -0.21% 2,238.83 +18.01%
    DJIA INDU 24,231.59 -0.17% 19,762.60 +22.61%
    NASDAQ IXIC 6,847.59 -0.39% 5,383.12 +27.20%

    Portfolio Indices

    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 3.071 -0.59% 2.105 +45.91%
    Valuation Rate USD/AUD 0.76594 +0.58% 0.72663 +5.40%
    AUD-denominated Index AUD 4.011 -1.16% 2.895 +38.53%

    Portfolio stock prices

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1,025.07 -0.88% $792.45 +29.35%
    Alphabet C GOOG $1,010.17 -1.04% $771.82 +30.88%
    Apple AAPL $171.05 -0.47% $115.82 +47.68%
    Amazon AMZN $1,162.35 -1.23% $749.87 +55.00%
    Ebay EBAY $35.20 +1.58% $29.69 +18.55%
    Facebook FB $175.10 -1.18% $115.05 +52.19%
    PayPal PYPL $75.30 -0.59% $39.47 +90.77%
    Twitter TWTR $20.71 +0.63% $16.30 +27.05%
    Visa V $110.73 -1.66% $78.02 +41.92%
    VMware VMW $124.44 +3.60% $78.73 +58.05%

    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) fell 0.3%, the first retreat in a week.
    The EUR was little changed at USD 1.1908.
    Japan’s JPY gained 0.4% to 112.095 per USD.
    Bloomberg

    AUD

    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): $58.27/barrel +1.52% Chart
    • ICE (London) Brent North Sea Crude: $63.64/barrel +1.61% Chart
    • NYMEX Natural gas futures: $3.06/MMBTU +1.29% Chart

    flag_australia AU: House Prices. Nov 2017

    Press Release Extract [ser_au_housing]

    National dwelling values hold steady in November with Sydney trending lower while Perth bottoms out

    National dwelling values held steady in November, with a 0.1% fall in capital city dwelling values offsetting a 0.2% rise in values across the combined regional markets of Australia, according to CoreLogic’s November Hedonic Home Value Index results.

    According to CoreLogic head of research Tim Lawless, a significant contributor to the downwards movement over the month came from the Sydney housing market, which recorded a 0.7% fall in dwelling values, while a fall in values was also recorded across Darwin and regional Northern Territory which were both down 0.4% over the month. For the remaining broad regions of Australia, dwelling values were relatively steady, or experienced a subtle rise, over the month. National dwelling values tracked 0.2% higher over the past three months and have increased 5.2% over the twelve months ending November. The national annual growth rate has now halved since reaching a recent peak in May 2017, when dwelling values rose 10.4%.

    Conditions remain diverse across the regions

    Mr Lawless said, “The diversity in capital city housing market conditions is highlighted by the rolling quarterly change in dwelling values, which range from a 3.3% rise in Hobart, to a 2.7% decline in Darwin. However, considering that together these two cities account for less than 1.5% of total housing stock in Australia, they have had little effect on the overall headline figures.”

    He said, “On the other hand, softer housing market conditions across Sydney, which comprises roughly one fifth of national dwelling stock (and approximately one third by value), has a material influence over the headline growth trends.”

    The Sydney housing market moved through a recent peak in July 2017 and dwelling values have been trending lower each month since that time. Dwelling values were down 0.7% in November to be 1.3% lower relative to the market peak. Sydney’s 1.3% fall over the past three months is the greatest decline over a three month period since March 2016.

    While the rate of value decline in Sydney has gathered some momentum, it remains extremely modest. Mr Lawless believes there is mounting evidence that the Perth housing market may finally have bottomed out. Dwelling values across Perth have edged higher over each of the past three months to record the first rolling quarterly capital gain since late 2014. The three months to November saw Perth dwelling values rise by 0.3%. In addition to values moving off their low base, settled sales are rising (+3.8% year on year), homes are selling faster (59 days compared with 68 days a year ago) and advertised stock levels have reduced substantially (-12.7% compared with last year). He said, “If this is indeed the start of a recovery phase in the Perth housing market, it comes after dwelling values have fallen 10.8% since peaking in mid-2014.”

    In Melbourne the rate of value growth has slowed. However unlike Sydney, dwelling values continued to trend higher, albeit at a slower pace than a year ago. Melbourne dwelling values recorded relatively steady growth over the past few months with values increasing by 1.9% over the past three months. On an annual basis the rate of value growth has slowed to 10.1%, from a recent peak of 13.1% in July of this year.

    Mr Lawless said, “The stronger performance for Melbourne relative to Sydney can be attributed to a number of factors including a healthier level of housing affordability, a lower concentration of investment activity over recent years and higher rates of net migration.

    For Brisbane and Adelaide it’s a continuation of slow and steady growth. Brisbane dwelling values were up 0.1% over the month and Adelaide dwelling values were unchanged. Over the past three months, Brisbane dwelling values have increased by 0.6% while Adelaide values are just 0.1% higher. Over the last 12 months, Brisbane values are 2.4% higher and in Adelaide they are 3.4% higher. Hobart’s housing market has been the strongest performer over the past year, with values increasing by 11.5%. Over the past three months values have increased by 3.3% however, over the month, the 0.6% increase was much more moderate.

    Low inventory levels against a backdrop of rising demand are a key driver of the Hobart market, with advertised stock levels 36.3% lower than a year ago. Darwin continued to see dwelling values fall over the month (-0.4%), quarter (-2.7%) and year (-5.5%). Since values peaked all the way back in May 2014, they have fallen by 20.8% and to-date there is no sign of those falls levelling. In Canberra, capital gains continued with values rising by 0.9% over the month, 1.3% over the past three months and by 5.8% over the past year.

    House values are generally showing a stronger performance compared with the unit sector. Sydney and Perth were the only two capital cities where the annual change for unit values was greater than the annual change for houses.

    Although the level of new unit approvals has eased over recent months, pending unit supply remains historically high, as do the number of units under construction nationally. For Sydney’s apartment market, the biggest differential is that with affordability now stretched, units have become the preferred purchase option for price-sensitive buyers. In Perth, the high density dwelling sector is far less mature compared with the East Coast capitals. Perth housing supply has been more focused across the low density sector rather than high rise units.

    Mr Lawless said, “Overall, lower growth relative to houses across the unit sector reflects a general preference for lower density housing, particularly from owner occupiers, as well as the fact that demand for new units is now being impacted by tighter credit conditions for investors and high supply levels for new high-rise unit construction over recent years.”

    Rental rates across the nation increased by 0.1% in November 2017 to be 0.3% higher over the past three months and 2.8% higher over the past year. Sending a signal that gross yields have bottomed out, the rate of rental growth has been slightly stronger than the rate of dwelling value growth over the past quarter. On an annual basis however, rental growth remains much slower than value growth. As a result of the recent stronger growth in rental rates, gross rental yields have steadied after trending lower over recent years. Despite the subtle rise, gross rental yields nationally remain at low levels, recorded at 3.46% for houses and 4.09% for units.

    Gross rental yields have drifted to new record lows in Melbourne and Canberra but have started to lift in Sydney.

    Across each capital city except for Darwin, gross rental yields now sit at a lower level than they were 12 months ago. Gross rental yields have recently been at historic lows in Sydney, however, the recent rental growth, accompanied by value falls, has resulted in a marginal lift in yields. Rental yields have continued to ease in both Melbourne and Canberra, sitting at record lows of 2.88% and 4.39% respectively. In the remaining capital cities, each city except for Adelaide and Darwin has seen yields continue to fall over recent months.

    CoreLogic, “CoreLogic Hedonic Home Value Index. Nov 2017“, 1 Dec 2017 More

    flag_australia AU: CBA Manufacturing PMI. Nov 2017

    Press Release Extract [ser_au_pmi]

    Key points::

    • PMI Nov 17: 56.3 Expansion, faster rate of growth
    • PMI Oct 17: 55.5 Expansion

    The headline index from the survey, the seasonally adjusted Commonwealth Bank Manufacturing Purchasing Managers’ Index™ (PMI®), rose to 56.3 in November from 55.5 in October. This signalled the joint-fastest improvement in business conditions since December 2016, on a par with March. Manufacturing sector growth has now accelerated for three consecutive months.

    au_cba_pmi_20171201

    Summary

    Growth in the Australian manufacturing sector gained further momentum in November, underpinned by the strongest increases in output and new orders for five months. With manufacturers confident that demand growth will be sustained, output prices were raised. Meanwhile, rising capacity pressures encouraged firms to add to their payrolls at a quickened pace, with the rate of job creation at a survey peak.

    Incoming new business increased markedly in November and at the fastest pace since June. Some panellists noted that demand from abroad was a contributing factor behind greater inflows of new work. New Zealand, China and the US were all cited as sources of new business growth. Subsequently, new export orders increased solidly and at the quickest rate in four months. The buoyant demand environment encouraged firms to raise production. Output growth accelerated in November to a five-month high.

    November data signalled a further rise in capacity pressures. Backlogs of work were accumulated at a faster rate amid reports of staff and raw material shortages. Consequently, firms hired additional staff. In fact, the rate of job creation was the sharpest seen across the 19-month survey history.

    Robust demand conditions also exerted pressure on supply chains. Average lead times lengthened to a marked degree in November. Concurrently, purchasing activity increased sharply.

    On the price front, input cost inflation accelerated to the highest since March amid rising global commodity prices. This, combined with strong demand, encouraged firms to raise output charges. Output expectations remained strong in November. The degree of optimism was unchanged from October’s three-month high. Projections of new customer acquisitions, organic growth and new marketing campaigns underpinned an upbeat outlook.

    Commenting on the Commonwealth Bank Manufacturing PMI data, Gareth Aird, Senior Economist at the Commonwealth Bank, said:

    ‘After some softness in the September quarter we have seen a decent lift in both the November and October readings. The continued improvement in the global economy coupled with a slightly weaker AUD is providing support to the local manufacturing sector. Broad-based strength in the PMI components such as output, new orders and employment suggests that Australia’s manufacturing sector looks well placed heading into the new year. The sharp lift in input prices points to some downstream inflationary pressures. But the favourable backdrop of rising global demand means that local manufacturers have been able to lift output prices accordingly.’

    Commonwealth Bank of Australia, “Manufacturing PMI. Nov 2017“, 1 Dec 2017 More

    flag_europe EU: Eurozone Manufacturing PMI. Nov 2017

    Press Release Extract [ser_eu_pmi]

    Key findings:

    • Final Eurozone Manufacturing PMI at 60.1 in November (Flash: 60.0, October Final: 58.5)
    • Growth of output and new orders climb to multiyear highs, supporting survey-record job creation
    • PMI readings at, or near to, record highs in Germany, the Netherlands, Austria and Ireland

    eu_pmi_20171201

    The upturn in the euro area manufacturing sector continued to surge forward in November. Strong accelerated expansions in production and new orders, aided by series-record growth in new export business, underpinned the steepest increase in employment since the survey began in June 1997.

    The final IHS Markit Eurozone Manufacturing PMI® rose to 60.1 in November, its best reading apart from April 2000’s series-record high. The headline PMI has now remained above the neutral 50.0 mark for 53 months, with the latest figure slightly above the earlier flash estimate of 60.0.

    November saw rates of improvement in overall operating conditions strengthen across the consumer, intermediate and investment goods sectors. The fastest rate of increase was seen in investment goods and the slowest at consumer goods producers. Growth hit a series-record in the intermediate goods category.

    November saw the upswing in the eurozone manufacturing sector remain broad-based by nation, with all of the countries covered by the survey reporting expansions for the sixth straight month.

    The upturn was again led by a solid core of Germany, the Netherlands and Austria, with growth accelerating to record highs in the latter two and to slightly below one in Germany. The Ireland PMI also posted one of its highest readings so far.

    Growth also improved to multi-year highs in Italy (81- month record) and France (84-month high) and rose to a near 11- year peak in Spain. Greece registered the weakest growth overall, although its PMI nonetheless stayed in expansion territory for the sixth consecutive month.

    November saw rates of expansion in production and new orders rise to the highest since February 2011 and April 2000 respectively. Companies reported strong inflows of new work received from both domestic and non-domestic clients.

    The level of new export business rose at the fastest pace since the survey began in June 1997. Rates of expansion improved across all of the nations covered, reaching near series-record highs in six (Germany, Italy, Spain, the Netherlands, Ireland and Austria). There were reports of stronger trade flows from the USA, Asia and between EU nations.

    Strong new order inflows led to the steepest accumulation of backlogs of work since data on outstanding business were first collected in November 2002. Brighter market conditions and the resulting pressure on capacity were also the main factors driving up employment, with job creation hitting a fresh survey-record high.

    Staffing levels were raised in all of the nations covered by the survey, with almost all seeing a faster pace of increase (the sole exception being Italy). Moreover, rates of job creation were either at (the Netherlands), or close to (Germany, Spain, Austria and Greece), survey-record highs in a number of countries.

    Price pressures intensified in November. Input costs rose at the quickest pace in six-and-a-half years, while output charges increased to the greatest extent since June 2011. Increased input costs reflected a combination of rising commodity prices and a sellers’ market developing for certain inputs.

    The latter factor was further highlighted by the trend in supplier delivery times, which lengthened to one of the greatest extents in the survey history. Pressure on vendor capacity reflected increased demand for inputs, as purchasing activity at manufacturers rose at the sharpest pace in over seven-and-a-half years.

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

    November’s surveys produced a clean sheet of improved PMI readings for all countries, resulting in the best performance for eurozone manufacturing since the height of the dot-com boom over 17 years ago. There’s only been one month (April 2000) in the entire 20-year history of the survey with a higher PMI reading.

    ‘Given the surge in demand for inputs caused by the production growth spurt, it’s not surprising that recent months have seen some of the most severe supply chain bottlenecks in the history of the euro. With demand often exceeding supply, we’re seeing a shift to a sellers’ market, with growing numbers of suppliers able to hike prices. Inflationary pressures are at their highest for over six years.

    ‘The buoyant November data looks likely to add to the global dominance of euro area manufacturing seen so far this year. Eurozone manufacturers have dominated the global PMI rankings in 2017, gaining an increased share of global trade as exports boom, buoyed in part by the weak currency.

    ‘Companies are clearly expanding rapidly. Employment growth has hit an all-time high and business investment on machinery is trending sharply upwards, suggesting manufacturers are looking forward to the upturn persisting well into 2018.’

    IHS Markit, “Eurozone Manufacturing PMI. Nov 2017“, 1 Dec 2017 More

    flag_usa US: Construction. Oct 2017

    Press Release Extract [ser_us_const]

    Total Construction

    Construction spending during October 2017 was estimated at a seasonally adjusted annual rate of $1,241.5 billion, 1.4 percent (±1.5 percent) above the revised September estimate of $1,224.6 billion. The October figure is 2.9 percent (±1.6 percent) above the October 2016 estimate of $1,206.6 billion. During the first 10 months of this year, construction spending amounted to $1,029.6 billion, 4.1 percent (±1.2 percent) above the $988.8 billion for the same period in 2016.

    us_construction_20171201

    Private Construction

    Spending on private construction was at a seasonally adjusted annual rate of $949.9 billion, 0.6 percent (±0.8 percent) above the revised September estimate of $943.8 billion. Residential construction was at a seasonally adjusted annual rate of $517.7 billion in October, 0.4 percent (±1.3 percent) above the revised September estimate of $515.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $432.2 billion in October, 0.9 percent (±0.8 percent) above the revised September estimate of $428.4 billion.

    Public Construction

    In October, the estimated seasonally adjusted annual rate of public construction spending was $291.6 billion, 3.9 percent (±2.6 percent) above the revised September estimate of $280.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.0 billion, 10.9 percent (±2.5 percent) above the revised September estimate of $71.2 billion. Highway construction was at a seasonally adjusted annual rate of $86.8 billion, 1.1 percent (±6.3 percent) above the revised September estimate of $85.9 billion.

    US Census Bureau, “Construction. Oct 2017“, 1 Dec 2017 More

    flag_usa US: Manufacturing PMI. Nov 2017

    Press Release Extract [ser_us_pmi]

    Key findings:

    • PMI at 53.9 in November
    • Production and new orders increase solidly
    • Output prices raised to greatest extent since December 2013

    us_pmi_20171201

    November survey data indicated improved operating conditions across the US manufacturing sector. The upturn was supported by solid, albeit slightly weaker, increases in output and new orders. Staffing levels meanwhile rose at a robust pace, despite the rate of job creation softening since October. However, signs of capacity pressures persisted, with backlogs of work rising again. Output charges rose at the fastest pace since December 2013. Input prices also rose at a quicker rate that was steep overall. Business confidence was robust, and reached its highest since January 2016.

    The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 53.9 in November, down from 54.6 in October. The latest index reading signalled robust, albeit slower, overall growth in the manufacturing sector. The latest upturn was in line with the long-run series average.

    Goods producers increased their output at a rate only slightly below that seen in October. Anecdotal evidence suggested that the rise was due to greater order volumes and robust client demand.

    New orders received by manufacturers rose at the second-fastest pace since March in November. Panellists linked the latest upturn to more favourable demand conditions, and noted more orders from domestic and foreign clients. Furthermore, export sales rose at a rate that, though moderate, was the second-fastest in 15 months.

    The level of outstanding business at manufacturing firms increased at an accelerated pace that was the most marked since April. Employment levels, meanwhile, grew at the second-strongest rate seen since June 2015 in November.

    Average prices charged by manufacturers rose further in November, with the pace of inflation accelerating to the fastest in almost four years. Anecdotal evidence suggested the increase was due to greater cost burdens which were largely passed on to clients. Input price inflation also quickened since October and was steep overall. Survey respondents commonly stated that components costs rose due to logistical delays.

    Buying activity at goods producers grew at the strongest pace since February as firms adapted to larger new order volumes. Pre-production inventories also increased amid reports of stockpiling.

    Output expectations among goods producers remained robust in November, with positive sentiment improving to its highest since January 2016. A number of panel members linked greater optimism to larger client bases and planned expansion into new markets.

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

    ‘US manufacturers reported further solid growth in November. The rate of expansion settled slightly after October’s rebound from the hurricanes, but still leaves the sector on course for its best quarter since the opening months of 2015.

    ‘What’s especially encouraging is that growth is being led by producers of business equipment and machinery, indicating investment spending is on the rise.

    ‘Jobs growth in the sector has also picked up in recent months compared with the subdued hiring earlier in the year, suggesting that an expansionary mood is beginning to prevail in the goods producing sector. Business optimism is now at its highest since the start of 2016, underscoring how firms believe the upturn has further to run as we move into 2018.

    ‘Prices continued to rise at an increased rate, linked to higher costs, though in many cases the price hikes were linked to ongoing supply chain disruptions since the hurricanes, suggesting inflationary pressures should start to cool soon, at least in terms of manufacturing costs.’

    IHS Markit, “IHS Markit U.S. Manufacturing PMI™ – final data: November PMI signals robust manufacturing growth“, 1 Dec 2017 (09:45) More

    Global: JPMorgan Global Manufacturing PMI. Nov 2017

    Press Release Extract [ser_global_pmi]

    Key points:

    • Global PMI 54.0 (Oct: 53.5)
    • Output 54.9 (Oct: 53.7)
    • New Orders 55.1 (Oct: 54.2)
    • New Exports 53.7 (Oct: 52.8)
    • Employment 52.8 (Oct: 52.6)
    • Input Prices 62.2 (Oct: 61.4)
    • Output Prices 54.2 (Oct: 53.5)
    • Future Output 63.1 (Oct: 62.6)

    November saw the upturn in the global manufacturing sector strengthen, with rates of expansion in output, new orders and employment all hitting multi-year highs. Price pressures remained elevated, however, with input costs and output charges rising at accelerated and above long-run average rates.

    global_pmi_20171201

    The J.P.Morgan Global Manufacturing PMI™ – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posted 54.0 in November, up from 53.5 in October and its highest reading since March 2011. The headline PMI has signalled expansion for 21 consecutive months.

    Business conditions improved across the consumer, intermediate and investment goods sectors. The strongest expansion was signalled at intermediate goods producers and the slowest in the consumer goods category.

    global_pmi_sectors_20171201

    Growth remained sharper (on average) in developed nations compared to emerging markets. The euro area was a bright spot, with its PMI rising to a near-record high. Rates of increase also strengthened in Japan (44-month high), the UK (51-month high), Australia (8-month high) and Canada (2-month high). Growth slowed slightly in the US, but remained solid overall.

    In the main emerging nations, growth eased to a five-month low in China, but accelerated in India (fastest in over a year), Brazil (81-month high) and Russia. Mexico returned to expansion after contracting in October.

    Global manufacturing production expanded at the quickest pace since February 2011, supported by a similarly rapid increase in new order intakes. There was also a bounce in international trade flows, as growth of new export business hit a near seven-year high.

    Strong demand tested capacity, leading to a further solid increase in employment. The pace of job creation was the steepest in six-and-a-half years, with higher staffing levels registered in almost all of the nations covered by the survey. Notable exceptions were job losses in China, South Korea and Russia.

    Price pressures remained elevated in November. The rates of inflation in input costs and output charges were the sharpest registered since May 2011. Both price measures were higher (on average) in developed nations compared to emerging markets.

    Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said: ‘The November survey points to a strong increase in the rate of expansion of the global manufacturing sector, with growth of output, new orders, new export business and employment all gaining strength. Inflationary pressures continued to build across the production pipeline.’

    JP Morgan, “JPMorgan Global Manufacturing PMI. Nov 2017“, 1 Dec 2017 (11:00) More

    flag_japan Japan update

    Nikkei Japan Manufacturing PMI. Nov 2017

    Press Release Extract [ser_jp_pmi]

    Key points:

    • Production rises at quickest rate since February 2014
    • Broad-based increase in new orders
    • Input price inflation edges higher

    jp_pmi_20171201

    Growth in the Japanese manufacturing sector gathered momentum in the latest survey period. New business expanded at the fastest rate since March 2014, while rising demand from China supported a nine-month high in export growth. In turn, firms raised production to the greatest extent in 45 months.

    Meanwhile, deteriorating delivery times and robust demand conditions intensified capacity pressures. In line with greater production requirements, firms boosted employment. On the price front, input costs continued to rise at a far steeper rate than output prices.

    The headline Nikkei Japan Manufacturing Purchasing Managers’ Index™ (PMI)® – a composite single-figure indicator of manufacturing performance – increased in November to 53.6, from 52.8 in October. This signalled the strongest improvement in manufacturing sector conditions since March 2014.

    New orders placed with Japanese manufacturers increased at the most marked pace for 44 months in November. According to anecdotal evidence, new business inflows were underpinned by demand from overseas. In turn, new export orders rose at the quickest pace since February. Stronger demand prompted businesses to raise production. In fact, output growth accelerated for the fourth month in succession to a 45-month high.

    However, panellists indicated that greater incoming new orders resulted in higher volumes of unfinished work. Backlogs of work were accumulated at the fastest rate since March 2014. Other survey respondents indicated that outstanding business was a consequence of delayed suppliers’ delivery times. Pressure on supply chains continued to rise in the latest survey period. Average lead times deteriorated for a nineteenth consecutive month, albeit to the weakest extent since August.

    To fulfil incoming new orders, firms used inventories of finished goods. The rate of depletion quickened to the joint-fastest since December 2016, on a par with July.

    In line with greater demand, Japanese manufacturers enhanced operating capacity by taking on more staff. The rate of job creation was solid and quickened to a six-month high. Panel members suggested that employment was expanded to cater for the influx in new business.

    Japanese manufacturers increased average prices charged in November amid stronger sales. The rate of inflation accelerated slightly for the third consecutive month in line with increased costs of production. Raw material price hikes were widely reported by companies surveyed in November. Input price inflation quickened from October to a 35-month high.

    Nonetheless, companies were not deterred by rising input prices, boosting purchasing activity in line with greater output requirements. Japanese manufacturers also had to deplete pre-production inventories for use in production.

    Lastly, business optimism strengthened during November. New product launches and forecasts of higher new orders were cited as reasons to be confident.

    Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

    ‘The upturn in the Japanese manufacturing sector gathered momentum in November. Demand from overseas underpinned a 44-month high in new business growth. Consequently, production was boosted to the greatest extent since February 2014.

    Stronger sales also spurred on firms to raise output prices. Though inflation was modest, Bank of Japan policymakers will be encouraged given it has now quickened in each of the last three months. Nonetheless, rising raw material prices and yen weakness continue to weigh on profit margins, with cost pressures rising at the fastest rate since December 2014.

    With rising orders testing operating capacity across the sector, firms raised employment. New business inflows also appeared to lift confidence following October’s 11-month low.’

    IHS Markit, “Nikkei Japan Manufacturing PMI® – Manufacturing sector improves at sharpest rate for 44 months“, 1 Dec 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

    Press Release Extract [ser_cn_pmi]

    Key points:

    • Production and new orders both increase at modest rates
    • Purchasing costs continue to rise sharply
    • Confidence towards the business outlook drops to joint-lowest on record

    cn_pmi_20171201

    Chinese manufacturing sector operating conditions continued to improve in November, albeit at a marginal pace. Output and new orders both rose only modestly, leading to a softer expansion in buying activity. At the same time, companies faced a further sharp increase in average input costs, that led to a notable rise in selling prices. Efforts to cut costs contributed to another fall in staffing levels, with the rate of decline quickening to a three-month record.

    Subdued growth in new work and a sustained fall in employment coincided with a reduction in business confidence towards the one-year outlook. Notably, firms expressed the joint-weakest degree of optimism on record.

    The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – registered 50.8 in November, down from 51.0 in October. While remaining above the crucial 50.0 value, the index dipped to its lowest level for five months to signal only a marginal upturn in operating conditions.

    Chinese goods producers continued to increase their production levels in November. Although the pace of expansion picked up slightly from October, the rate of growth was modest overall.

    Total new orders rose at a similarly modest pace in November. Companies that registered higher new work commented on greater client bases and the launch of new products. Nonetheless, data indicated that client demand was relatively subdued across both the domestic and external markets, as new export sales also rose modestly.

    As has been the case in each month since November 2013, staff numbers at Chinese manufacturers declined during November. Though modest, the rate of job shedding was the fastest seen in three months. As a result, companies registered a further increase in the amount of unfinished business at their units. The rate of backlog accumulation remained marked, despite softening since October.

    Reflective of only modest growth in production, firms raised their buying activity marginally in November. At the same time, inventory levels of both purchased and finished items were little-changed from the previous month, as efforts to raise stock holdings at some firms were largely offset by more cautious inventory policies elsewhere.

    Issues with logistics and stricter environmental policies added further pressure to supply chains in November. That said, the degree to which vendor performance deteriorated was the least marked for four months.

    Difficulties in obtaining inputs alongside higher raw material prices in international markets underpinned a further sharp rise in input costs faced by Chinese manufacturers. As a result, companies raised their prices charged at a solid pace.

    Relatively muted growth in new work coincided with weaker optimism towards the 12-month outlook for production. Notably, the degree of positive sentiment was the joint-weakest seen since the series began in April 2012.

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

    ‘The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) fell marginally from the previous month to 50.8 in November, but remained in expansion territory. The sub-index of output inched up, rising for the first time in four months, but the new orders sub-index declined. The increase in input prices moderated while the rise in output prices accelerated, with both maintaining rather quick rates of growth. Stocks of purchases turned around to increase as stocks of finished goods continued to diminish.

    ‘For the most part, the manufacturing sector remained stable in November, although some signs of weakness emerged. In the fourth quarter, the economy is likely to maintain the stability observed since the start of the second half of the year. Economic growth in 2017 is expected to be higher than last year, but it may come under downward pressure in 2018.’

    IHS Markit, “Caixin China General Manufacturing PMI™ PMI dips to five-month low in November “, 1 Dec 2017 More

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