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

EUROZONE MANUFACTURING PMI SLOWS TO A CRAWL

The rate of expansion in eurozone manufacturing production eased to its lowest during the current 14-month growth sequence in August, as companies faced slower increases in both total new orders and new export business. The final seasonally adjusted Markit Eurozone Manufacturing PMI® posted 50.7 in August, down from 51.8 in July, its lowest reading since July last year. The headline PMI was also below its earlier flash estimate of 50.8.

image

National PMI data signalled a broad easing in the manufacturing recoveries underway across much of the currency union. Although Ireland was a noticeable exception, with its PMI at the highest level since the end of 1999, rates of expansion slowed in Spain, the Netherlands and Germany.

(…) France remained the laggard, with its PMI signalling the sharpest rate of decline since May 2013, while Italy dropped back into contraction territory following 13 months of expansion.

The rate of expansion in new work received also slowed to the weakest in the current 14-month period of growth. Economic and geopolitical uncertainties were the main factors underlying slower demand growth. Inflows of new export business posted the slowest rise since July 2013.

France was the only nation to report an outright decline in new export orders in August, while rates of increase eased in Germany, Italy and Greece. Ireland, Spain and Austria reported stronger inflows of new export business.

With the trend in new order inflows still generally lacklustre overall, backlogs of work fell further and companies trimmed their payrolls for the second straight month. Although the reduction in headcounts was only slight, it was nonetheless the steepest since November 2013.

The big-three nations of Germany, France and Italy all reported job losses, as did Greece. Staffing rose in Spain, the Netherlands, Austria and Ireland, but Ireland was the only nation to report a faster pace of hiring than in July.

Signs that the manufacturing sector may be on course for further easing in the coming months was signalled by data on purchasing and stock holdings. Input buying volumes fell for the first time in over a year and inventories were reduced further as strong competition led companies to maintain a cost-cautious position. Meanwhile, the forward-looking ratio of new orders to finished goods inventories dipped to a 13-month low.

Average input prices continued to increase during August, with the rate of inflation slightly lower than the previous month. Manufacturing output charges continued to show little movement, with the rate of inflation little-changed compared to the pace prevailing over the prior three months.

German and Italian manufacturers continued to signal a modest degree of pricing power, in contrast to the cuts in selling prices seen across the other nations covered by the survey.

image

CHINA MANUFACTURING PMI EASES TO 50.2

Chinese manufacturers saw a further improvement in overall operating conditions in August. That said, the pace of improvement eased to a fractional pace as both
output and new order growth slowed and job shedding in the sector persisted. Meanwhile, input costs declined for the first time in three months while increased
competition for new business led manufacturers to reduce their selling prices.

image

After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 50.2 in August, down from July‟s 18-month high of 51.7. This signalled only a fractional pace of improvement that was the weakest in three months.

The decline in the headline index partly reflected slower expansions of both output and total new business during August. The rates of production and new order growth were moderate overall, having eased from 16- month highs in July. Data suggested that client demand softened both at home and abroad, as new export work also rose at a weaker pace in August. While some panellists mentioned that improving market conditions and new client wins boosted new work intakes, others commented on relatively subdued client demand.

As has been the case since November 2013, manufacturing firms in China continued to reduce their staffing levels in August. Furthermore, the rate of job shedding was the quickest in three months and moderate overall. Companies that reported lower workforce numbers partly attributed this to the implementation of cost reduction policies. Despite lower staff numbers, backlogs of work rose for the third successive month in August, albeit marginally.

In response to greater volumes of new work, firms raised their purchasing activity for the fourth month running in August. That said, the rate of growth weakened from July and was modest overall. In contrast, stocks of purchases declined moderately over the month following a slight expansion in July. A number of respondents increased their use of current inventories as part of ongoing efforts to readjust inventory levels.

Average input costs faced by Chinese manufacturers declined in August. However, the rate of reduction was only slight. Selling prices set by manufacturers also
declined, albeit marginally. Anecdotal evidence suggested that a number of companies reduced their selling prices as part of efforts to increase new business.

China PMI

The Chinese government’s official purchasing manager’s index fell for the first time since February, from a two-year high of 51.7 in July to 51.1 in August.

The drop in the official PMI in August was broad-based, with the biggest falls in output and new orders.

New export orders also fell but by a smaller margin, indicating that manufacturing weakness last month was primarily the result of lacklustre domestic demand. (FT)