Edge and Odds

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Edge and Odds

Invest with smart knowledge and objective odds

Month: October 2015

EUROZONE COMPOSITE PMI SOLID AT 53.6

The eurozone economy continued to make steady progress in September, as solid gains in output and new orders supported further job creation. That said, the rate of growth eased to a four-month low.

The final Markit Eurozone PMI® Composite Output Index posted 53.6, down from 54.3 in August and below the earlier flash estimate of 53.9. Following the dip in September, the average rate of expansion over the third quarter failed to accelerate and instead equalled the second quarter’s four-year high.

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September saw solid, albeit slower, increases in output at manufacturers and service providers alike, with the rate of growth in the service sector slightly outpacing that achieved by manufacturing. Economic activity expanded across the ‘big-four’ nations and Ireland. (…) Growth also decelerated in Germany, Spain and Italy, but nonetheless remained relatively solid in each of these nations.

There was also better news coming out of France, with growth accelerating to a three-month high in September. The Output Index was also revised up by 0.5 points since the flash reading.

Employment rose for the eleventh successive month in September, despite the rate of jobs growth easing to its weakest since January. Staffing levels were raised in Germany, Spain and Ireland, with Germany the only nation to see an accelerated increase.

Further growth of output and employment is also being signalled for the start of the fourth quarter, as new business continued to rise at a solid pace and backlogs of work rose at the quickest rate since May 2011. New orders rose in all of the nations covered, whereas outstanding business increased in Germany, France, Spain and Ireland, but fell in Italy.

Average input costs rose only marginally in September, with the rate of inflation having slowed sharply since hitting a three-year high in May. The latest easing mainly reflected the steepest drop in manufacturing input costs since January, driven by lower prices for commodities and oil in particular. Service sector cost inflation crept higher. Average selling prices in the eurozone, meanwhile, were unchanged from August.

The Eurozone Services Business Activity Index posted 53.7 in September, a seven-month low and below the earlier flash estimate of 54.0. The headline index has signalled expansion in each of the past 26 months, with the latest rate of growth above the average for that sequence.

The increase in business activity was underpinned by growth in new orders, with the pace of expansion in new work accelerating slightly since August. With backlogs of work also rising at the second-fastest rate in over four years and business optimism† still positive, the expansion in services output is likely to continue in coming months.

Concurrent growth of business activity and new orders was recorded in each of the five nations covered by the survey in September. The steepest expansion of output was registered in Ireland, with Spain in second place following a sharp growth slowdown (nine-month low). Growth also eased in Germany and Italy (both to two-month lows), but ticked higher in France.

The broad-based expansion of business activity across the eurozone service sector encouraged further job creation during September. Employment rose for the eleventh consecutive month, with increases seen in Germany, Spain and Ireland. The rate of jobs growth improved to the fastest since December 2011 in Germany, but slowed in each of the latter two nations. Cuts were recorded in France and Italy.

Average service sector charges in the euro area rose marginally in September, ending an unbroken sequence of decline that started in late-2011. The trend at the eurozone level was mainly driven by Germany, where output prices were raised to the greatest extent for almost three-and-a-half years. Ireland also reported a strong increase, in contrast to reductions in France, Italy and Spain.

Cost pressures stayed relatively subdued in September. Input price inflation accelerated only marginally from August’s six-month low and remained well below the long-run average. Cost increases were signalled in all five of the nations covered by the survey.

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JAPAN SERVICES PMI DROPS FROM 53.7 TO 51.4

Latest survey data pointed to a slowdown in the expansion of the Japanese service sector. Business activity growth weakened, alongside a further easing in the rate of expansion in new orders. In contrast, employment growth resumed, having declined slightly in the prior month.

On the price front, increased competition encouraged service sector firms to reduce selling prices. Input prices, on the other hand, continued to increase, although the rate of inflation was slight.

Meanwhile, business sentiment weakened slightly from August’s 23-month record, although remained solid overall.

The seasonally adjusted Business Activity Index posted at 51.4, down from 53.7 in August (the highest reading in 22 months), thereby indicating a slower expansion in the Japanese service sector. Despite a lower figure, the average business activity reading in the third quarter (52.1) was the highest since the final quarter of 2013 (53.1). (…)image

Meanwhile, output growth at Japanese manufacturers slowed to the weakest pace in the current five-month sequence of expansion. The weaker increases in both the manufacturing and service sector was reflected in the Nikkei Composite Output Index which posted the lowest reading since April (51.2), down from 52.9 in
August (the highest reading in 19 months).

New business at Japanese services firms expanded for the sixth straight month in September. Although slowing, the rate of expansion was still in-line with the average in 2015. Manufacturers also registered an increase in new orders and at a rate of growth broadly unchanged from August’s seven month record.

Pressure on capacity was evident in the Japanese service sector as volumes of unfinished work accumulated further during the month. However, the rate of increase was only modest and weaker than the average over the current six-month sequence of accumulation. In contrast, manufacturers reported a decline in backlogs of work.

Alongside activity and new order growth, service sector companies hired additional staff in September, offsetting the fall observed in August. Although modest, the rate of expansion was the quickest since November 2014. There was also mention of the opening of new businesses helping to boost staff numbers. Meanwhile, staffing levels at manufacturers decreased for the first time since March.

According to anecdotal evidence, higher raw material and staffing costs led to a rise in input prices at Japanese service providers. However, the rate of inflation was only modest. Meanwhile, charges declined slightly as companies reported increased competition. Similarly, in the goods producing sector, input price inflation resumed during the month, while charges declined at the quickest rate since March 2013.