The global economy started 2017 with growth gaining momentum, according to PMI survey data. The JPMorgan Global PMI, compiled by Markit from its various national surveys, rose for a fifth successive month in January, up from 53.6 in December to a 22-month high of 53.9.
The latest data are consistent with global GDP rising at an annual rate of 2.5% at the start of the first quarter.
The upturn in growth was led by the developed world, where the PMI struck a 14-month high in January. Emerging market growth also edged up, rising to the highest for 23 months, but continued to underperform relative to the rich world – a trend that has been evident throughout the past three years.
Current output: developed v emerging markets
Encouragingly, a newly-launched index tracking global business optimism about future output rose to a 20-month high, with improved sentiment about the year ahead seen in both developed and emerging markets.
Future output: developed v emerging markets
While service sector activity rose at the steepest rate for just under one-and-a-half years, manufacturing growth eased, though remained close to December’s two-and-a-half year peak. Expectations regarding future output improved in both sectors.
Other global PMI sub-indices add to the evidence that growth is likely to continue to accelerate in early-2017. First, inflows of new business rose globally at the fastest rate since September 2014, increasing at improved rates in both manufacturing and services. Second, firms added to their payrolls at a rate equal to December’s 19-month high. Third, backlogs of work showed the largest increase for 22 months.
Employment and new business
The strengthening of global economic growth continued to be accompanied by rising inflationary pressures. Average input costs showed the largest monthly increase since June 2011.
Average prices charged for goods and services meanwhile rose as firms increasingly passed higher costs on to customers. While selling price inflation eased slightly compared to December, the rise was nevertheless still the second-largest in over five-and-a-half years.
- German factory orders significantly exceeded economists’ forecasts, rising 5.2% for the month. Surprisingly, much of the increase came from domestic orders (blue line below). (The Daily Shot)
The Modesty of German Workers Is Impeding Inflation Labor unions kept a lid on pay demands, signaling weak inflation pressures to come
(…) The Federal Statistics Office in Wiesbaden reported on Monday that real wages — that is, discounting the impact of inflation — rose only 1.8 percent in 2016, the slowest pace in the last three years. (…)
Wage gains have been reasonable, “but not what you would expect in a country which is near full employment,” he says “This is a result of the traditional cooperation between unions and employers, given the common understanding that employees don’t want to ask too much because they don’t want to price their companies out of the global market.”
What modesty? For U.S. workers’ real wages to have risen 1.8% in 2016, nominal wages wages would have had to increase 3.9% vs the actual 2.5% gain…
What’s modesty in Japanese?
Source: Goldman Sachs, @joshdigga (via The Daily Shot)
If the U.S. economy is revving up, why this?
- Bank lending has stalled:
- And lending standards are tightening:
CHINA: HOW ABOUT THAT?
Rapidly rising rates in a leveraged economy is always dangerous…
President Donald Trump’s pledge to dismantle the Dodd-Frank financial overhaul is colliding with the same reality as his pledge to gut Obamacare: The Republican majority in Congress can’t decide how to make it happen and Democrats are vowing to fight.
Trump, who last month said Obamacare would be replaced “the same day or the same week,” or perhaps “the same hour,” acknowledged Sunday that the health-care law isn’t going away anytime soon. “We should have something within the year and the following year,” told Fox News’s Bill O’Reilly.
The Dodd-Frank directive he signed Friday is hitting the same road block on Capitol Hill and at federal agencies.
“The last thing we need at this point in time is the relaxation of regulation,” Draghi told the European Parliament’s committee on economic affairs in Brussels. “The idea of repeating the conditions that were in place before the crisis is something that is very worrisome.”
A par worth saving from John Cochrane on Dodd-Frank reform: “There is a huge difference between knowing how to run a bank — Goldman Sachs, say — and knowing how to run a banking system, or an economy. Banks hate competition. Economies love it. We have seen this failure many times before when successful bankers or businesspeople move to government.”
U.S. efforts to dismantle some bank regulations have left global work on a post-crisis framework in limbo, according to the chief financial officer of Denmark’s biggest bank. (…)
(…) “What is important for us is very much that we get a level playing field, that we don’t get a U.S. deregulation that is not followed up by European regulations as well,” he said.(…)
Trump’s Mexican stand-off unnerves US farmers Any unravelling of Nafta could hit deeply enmeshed crossborder food supply chains