Edge and Odds

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EUROZONE MANUFACTURING PMI UP BROADLY ON RISING ORDERS

The eurozone manufacturing upturn gained further momentum during November, with rates of expansion in production and new orders the fastest for around one-and-a-half years. Growth was broad-based by country, with output and new business inflows improving in almost all of the nations covered (the exception being Greece).

At 52.8 in November, the final seasonally adjusted Eurozone Manufacturing PMI® matched its earlier flash estimate and posted its highest level since April 2014. The PMI has now remained above the no-change mark of 50.0 for 29 straight months. PMI readings posted in expansion territory in almost all of the nations covered by the survey, with the best growth outcomes signalled for Italy, the Netherlands and Ireland.

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Although Germany and Spain only populated the mid-range of the PMI ranking table, rates of expansion edged higher in both of these nations. Austria slipped to sixth position, just ahead of France which recorded only a slight improvement in operating conditions. Greece stayed at the foot of the table and was again the only nation to register contraction. However, the Greek PMI stands well above its record low of 30.2 registered in July, as recent sharp easing in the rates of decline in output, new orders and employment have taken its PMI up to an eight-month high of 48.1.

imageThe latest expansion of eurozone manufacturing production was underpinned by improving inflows of new business and the steepest intake of new export orders* since May. New export business rose in Germany, Italy, Spain, Ireland, the Netherlands and Austria, with rates of growth strengthening in all but the latter two of those nations. France and Greece saw new export business decrease.

Eurozone manufacturing employment rose for the fifteenth successive month in November, with the rate of jobs growth ticking to its highest since August. Companies generally linked increased staffing levels to improved new order inflows and higher backlogs of work. Manufacturing workforce numbers were raised in Germany, Italy, Spain, the Netherlands, Austria and Ireland. In contrast, France and Greece lowered employment during the latest survey month, although rates of reduction were only marginal and slower than in October in both cases.

Price pressures remained on the downside during November, with output charges and input costs both falling further. However, indices tracking both price measures moved higher, suggesting that the respective rates of deflation eased since October. With the exception of Greece (which saw accelerated cost inflation) all of the nations covered by the survey saw input prices fall further in November (albeit at slower rates). On the output charge side, only Germany, Ireland and the Netherlands saw increases in selling prices.

*Including intra-eurozone trade.

CHINA MANUFACTURING PMI EDGES UP ON HIGHER EXPORT ORDERS

Chinese manufacturing firms signalled that output stabilised in November, thereby ending a six-month sequence of reduction. Meanwhile, total new work continued to decline, and at a similarly modest rate to that seen in October, despite a pick up in new export business growth. Relatively soft overall client demand led firms to scale back their purchasing activity again in November, while inventories also declined. Deflationary pressures intensified over the month, as highlighted by sharper decreases in both input costs and output prices.

Adjusted for seasonal factors, the Purchasing Managers’ Index™ (PMI™) posted at 48.6 in November, up slightly from 48.3 in October. The health of the sector has now worsened in each of the past nine months. However, the latest deterioration was the weakest seen since June. The higher PMI reading was partly driven by a stabilisation of output volumes in November. This contrasted with reduced production in each of the prior six months. However, lower volumes of overall new work placed at Chinese manufacturers continued to weigh on the PMI figure.

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The rate at which new orders declined was similar to that seen in October and moderate overall. Data indicated that weaker domestic demand had acted as a drag on new order books, as new export business expanded in November and at the quickest rate in 13 months. According to panellists, improved foreign client demand boosted new work from abroad.

Reflective of lower overall workloads, Chinese manufacturers reduced their purchasing activity again in November. That said, the pace of decline was the weakest in the current five-month sequence. Payroll numbers also fell during the month, albeit at the slowest rate since May. Lower staffing levels contributed to a seventh successive monthly increase in the amount of work-in-hand (but not yet completed). Though modest, the rate of accumulation was the strongest seen since March.
Firms were relatively cautious towards their inventory holdings, as highlighted by cuts to both stocks of inputs and post-production goods in November. While stocks of inputs continued to fall at a modest pace, it was the first time that inventories of finished goods had declined since July.

Average vendor performance improved for the first time in seven months in November. That said, the degree to which lead times shortened was only marginal.

Manufacturing companies operating in China signalled a further fall in average input prices in November amid widespread reports of lower raw material costs. Furthermore, the rate of reduction quickened to the sharpest in nine months. As part of attempts to improve sales, companies generally passed on any savings to clients in the form of lower selling prices. In line with the trend for input costs, the rate of discounting accelerated since October and was the fastest recorded in 20 months.

From the WSJ:

China’s official manufacturing purchasing managers index, a gauge of the nation’s factory activity, fell to 49.6 in November from 49.8 a month earlier, missing the median 49.9 forecast from a Wall Street Journal poll of 13 economists.

The reading was the lowest level since August 2012, when the index hit 49.2, and it also marks the fourth straight month below the 50 mark that separates manufacturing expansion from contraction. (…)

China’s official nonmanufacturing purchasing managers index, also released on Tuesday, rose to 53.6 in November from 53.1 in October.

(Bloomberg)