Edge and Odds

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Edge and Odds

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EUROZONE MANUFACTURING PMI LOSING MOMENTUM

The recovery in the eurozone manufacturing sector was extended to a twelfth successive month in June. Signs that the upturn is losing momentum were still evident, however, as growth of both output and new orders slowed since May.

The final seasonally adjusted Markit Eurozone Manufacturing PMI® dipped to a seven-month low of 51.8, down from 52.2 in the prior month and below the earlier flash estimate of 51.9. The average reading for the second quarter (52.4) was also slightly below that for the opening quarter of the year (53.4).

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National PMI readings improved in Ireland and Spain, reaching a two-month high in the former and a seven-year record in the latter. PMI indices fell in all of the other nations, although only France and Greece signalled outright contractions.

imageJune saw manufacturing production expand at the slowest pace since September 2013. The weaker trend was most evident in France, which saw output
contract for the first time in five months and at the fastest pace during the year-to-date. Slower production growth was meanwhile registered in Germany (nine-month low), Italy, Ireland (both four-month lows), the Netherlands (11-month low) and Greece (three-month low).

Underlying the slower expansion of production was a weaker increase in new orders. Although new business inflows rose at the slowest pace since October 2013, this nonetheless extended the current upturn in new order volumes to 12 months.

Domestic market conditions remained generally subdued, according to companies, while levels of new export business rose at the least marked pace for almost a year. France posted the worst performance, with concurrent contractions of new orders and new export business registered for the second straight month. Moreover, the rates of contraction were the sharpest during the year-to-date in both cases.

Austria also reported declines in both total and export demand, while total new orders stagnated in Greece despite an increase in new export business. Growth of new orders meanwhile slowed in Germany, Italy and the Netherlands, but accelerated sharply in Ireland and Spain.

Manufacturing employment rose for the sixth successive month in June, although the rate of growth remained only marginal. France reported job cuts for the third straight month, while a reduction was also registered in Greece and staffing levels were broadly unchanged in Germany and Austria. Job creation slowed in almost all of the remaining nations, the notable exception being Spain – which reported the strongest increase since July 2007.

Input costs rose for the first time in five months in June, in some cases reflecting recent oil price increases. With costs showing a modest gain, manufacturers raised their average selling prices for the second month in a row. However, rates of increase in purchase prices and output charges were only modest. Supplier delivery times lengthened for the twelfth month in a row, and to the greatest extent since June 2011.

CHINA MANUFACTURING PMI EDGES UPTO 50.7

Chinese manufacturers signalled the first improvement in overall operating conditions for six months in June. Output rose for the first time since January, and at a
moderate pace. Growth was supported by the strongest expansion of total new work since March 2013, while new export orders rose for the second month running. Increased volumes of new business led to the quickest depletion of stocks of finished goods for nearly three years, while job shedding was the weakest in three
months.

After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 50.7 in June, up from 49.4 in May, and signalled the first improvement in business conditions since last December. That said, the rate of improvement was only slight and weaker than the historical average.

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The improvement in the health of the sector partly reflected the first expansion of total new business placed at Chinese manufacturers for five months during June. Furthermore, it was the strongest rate of new order growth in 15 months. Reports from panellists suggested that improving market conditions boosted sales in the latest survey period. New export business also rose in June, albeit at a marginal pace that was weaker than May’s 49-month high.

Increased volumes of new work led to the first expansion of output since January. The rate of growth was also the quickest since last November. June data signalled renewed capacity pressures at Chinese manufacturers, with backlogs of work rising for the first time in five months. That said, the rate of increase was only slight. Anecdotal evidence suggested that unfinished business rose due to increased amounts of new work. Consequently, stocks of finished goods declined at a moderate pace that was the fastest since September 2011. Staffing levels meanwhile declined for the eighth successive month in June. However, the pace of reduction eased to a modest pace that was the second-weakest in 2014 so far.

Purchasing activity in China’s manufacturing sector rose again in June, amid reports of higher production requirements. The rate of activity growth edged up to a
modest pace that was the strongest in the year to date. Average input costs increased for the first time since last December in June. That said, the rate of inflation was moderate and much weaker than the long-run series average.

China’s official purchasing managers’ index, which mainly surveys large, state-owned companies, hit 51 in June, up from 50.8 in May and the highest level since December, according to the National Bureau of Statistics. (FT)