Edge and Odds

The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

Invest with smart knowledge and objective odds

Month: July 2015

JAPAN MANUFACTURING PMI AT 50.1. STRONG EXPORT ORDERS

The rate of improvement in operating conditions at Japanese goods producers weakened in June. Production growth slowed to a fractional pace, while new orders returned to contraction territory. In contrast, new export orders increased at the fastest pace since December 2013, with reports of a favourable exchange rate helping to improve price competitiveness. Meanwhile, input prices increased, albeit at a historically muted pace, while charges rose for the second straight month.

At 50.1 in June, down from 50.9 in May, the headline PMI signalled a general slowdown of improvements in operating conditions at Japanese manufacturers. Furthermore, the latest reading was lower than the long-run series average. Concurrently, production growth at Japanese goods producers slowed to marginal pace in June and was the weakest this year so far (with the exception of April where a contraction was recorded).

image

Reports of a fall in new orders were commonly cited as the main factor behind lower output growth. According to anecdotal evidence, June’s marginal decline in incoming new work was due to a lack of capital investments and challenging economic conditions. As a result of weaker production requirements and subdued demand conditions, buying activity was scaled back in June. However, the rate of decline was marginal.

Employment, on the other hand, remained in modest growth territory for the third month running. Both consumer and investment goods producers noted increases in staff levels.

Meanwhile, new export orders rose at the quickest pace in one-and-a-half years in June. Several survey respondents mentioned a favourable exchange rate helping to improve price competitiveness, while others commented on greater sales volumes with China and Europe. In fact, all three monitored sectors signalled marked expansions in foreign demand.

On the price front, purchasing costs rose, amid reports of the deprecation of the yen against the dollar driving up raw material costs. However, the rate of increase was the second weakest in the 30- month period of inflation. Meanwhile, charges rose at the fastest rate since January, as companies tried to pass on higher cost burdens on to clients.

EUROZONE MANUFACTURING PMI, ORDERS REMAIN SOLID

The growth rate of the eurozone manufacturing sector continued to improve in June. This was highlighted by the final seasonally adjusted Eurozone Manufacturing PMI® rising for the second month running to reach 52.5, its highest reading since April 2014. The June final reading was in line with the earlier flash estimate.

image

The performance of the manufacturing sector also made progress during the second quarter as a whole, with the average readings for the headline PMI and the indices tracking both output and new orders all at their highest levels since Q2 2014. June saw the Netherlands rise to the top of the PMI growth league table, pushing Ireland into second position. Spain and Italy also continued to register solid expansions, albeit at slower rates than in the prior month.

Positive signs also came out of Germany, France and Austria. Although PMI readings for these nations were consistent with only modest growth, they were nonetheless improvements on May. For France this also represented a move back into expansion territory following a 13-month sequence of contraction.

The main negative from the latest survey was the deteriorating performance of the Greek manufacturing sector. The Greek PMI dropped to its second-lowest reading in the past two years, as output fell at the quickest pace since June 2013. New orders were also down sharply, as domestic conditions weakened and new export business shrank at the steepest pace in 28 months. Job losses were recorded for the third month running.

June data signalled the joint-fastest growth of eurozone manufacturing production in over a year, as the pace of increase in new orders matched May’s 13-month record. Companies benefitted from improved inflows of new work from both domestic and export clients.

The level of new export business rose again in June, extending the current sequence of unbroken expansion to two years. Germany, Italy, Spain, the Netherlands, Austria and Ireland all registered growth of new export orders, while France registered only a negligible decrease.

Jobs growth was registered in the eurozone manufacturing sector for the tenth consecutive month in June. Moreover, the rate of increase accelerated to its second-highest in almost four years, as companies responded to rising new order inflows and a moderate accumulation of backlogs of work. Employment rose in Germany, Italy, Spain, the Netherlands and Ireland.

Cost inflation remained solid in June, despite slowing from May’s three-year high, reflecting recent oil price increases and rising import costs resulting from the euro’s depreciation. Input price inflation accelerated in France, Italy, Spain, the Netherlands and Ireland, while costs increased in Austria for the first time since last September. Germany and Greece both reported sharp easings in their respective rates of cost inflation.

Meanwhile, average selling prices at eurozone manufacturers rose for the second time in the past three months. Output charges rose in Germany, Italy, Spain and the Netherlands, but fell in the other nations covered by the survey.

image

Contact: edgeandodds [at] gmail.com