FLASH PMIs
US private sector gathers momentum amid softer contraction in demand
The upturn is being driven by the services sector, which in part reflects unseasonably warm weather, and although the manufacturing survey data are showing signs of improvement, the factory sector remains in contraction and focused on inventory reduction.
The headline Flash US PMI Composite Output Index registered 50.2 in February, up sharply from 46.8 in January. The latest reading was the highest for eight months and signalled broadly unchanged output on the month across the private sector. Service sector firms registered a fractional uptick in business activity while manufacturers reported a slower decrease in output.
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Eurozone growth accelerates to nine-month high in February
The seasonally adjusted S&P Global ‘flash’ Eurozone PMI® Composite Output Index, based on approximately 85% of usual survey responses, rose for a fourth successive month in February, climbing to 52.3 from 50.3 in January to indicate the strongest expansion of business activity since last May.
February’s upturn was led by the service sector, where business activity rose for a second consecutive month, the index up from 50.8 to 53.0 to register the strongest expansion since last June. Manufacturers meanwhile eked out a modest gain in production, the factory output index up from 48.9 to 50.4 to signal the first increase in production since last May.
A key change in the services sector was the revival of growth in financial services activity, albeit with real estate remaining in decline, as well as resurgent tourism & recreation and media activity. Transportation broadly stabilised after seven months of decline, industrial services gained momentum and IT services enjoyed a surge in activity.
On the manufacturing side, chemical & plastics and basic resources remained the main areas of weakness while food & drink, household goods and industrial goods manufacturing showed further signs of recovery. Auto making likewise continued to pull out of the slump seen last year.
Within the euro area, both France and Germany returned to growth for the first times since last October and last June respectively. The composite PMI for France rose from 49.1 to 51.6, albeit with growth confined to the service sector. The composite PMI for Germany meanwhile edged up from 49.9 to 51.1 reflecting a second successive monthly rise in service sector activity and the first expansion of manufacturing output since last May.
However, it was the rest of the eurozone as a whole that reported the strongest performance, the composite index up from 51.4 to a nine-month high of 53.9 thanks to broad-based growth of manufacturing and services.
The acceleration of growth of output across the eurozone as a whole was fueled by the first, yet modest, rise in new orders since last May, which was in turn driven by the steepest increase in demand for services for nine months and the shallowest – though still marked – drop in new orders for goods over the same period.
The increase in output was also supported by firms once again eating into their backlogs of orders, notably in the manufacturing sector. The latest overall decline in backlogs was the smallest seen for six months, however, the shallower rate of decline in part reflecting the recent improvement in new business inflows.
In manufacturing, the renewed growth of output was also often linked to improved supply chains, with average supplier delivery times shortening for the first time since January 2020, and to the greatest degree since May 2009. An especially marked improvement in supplier performance was recorded in Germany, where a survey record shortening of lead times was reported.
Improved supplier performance was commonly linked to fewer supply chain shortages which, in addition to facilitating higher output, helped take pressure off industrial input prices, which rose only modestly in February and at the slowest rate since September 2020. Softer manufacturing cost inflation also often reflected weak demand for inputs, with purchasing by factories dropping sharply again in February as firms remained focused on inventory reduction.
In contrast, service sector firms reported a further steep rise in average input costs, the rate of inflation of which edged higher in February to remain among the steepest recorded over the history of the survey, albeit down from last year’s peaks.
Average prices charged for goods and services meanwhile continued to rise sharply, increasing at solid rates in both manufacturing and services as firms sought to pass higher costs on to customers, including in many cases greater staff costs. However, in both cases the rate of increase moderated compared to January – with manufacturing output price inflation notably down to a two-year low – to register the softest overall increase in prices charged for goods and services since October 2021.
While the return to growth of new orders also encouraged further hiring, with employment rising across both manufacturing and services in February, the rate of job creation edged down from January’s three-month high and continued to run well below rates seen this time last year. Slower jobs growth in part reflected labour supply shortages but was also often linked to uncertainty about the outlook.
Optimism about the year ahead nudged higher in February, rising to a one-year high, though was merely in line with the survey’s long-run average. Future sentiment has nevertheless improved considerably in both manufacturing and services since late last year, attributed by survey respondents to fewer concerns over the possibility of a deep recession, reduced worries around energy supply and prices, as well as signs of a peaking of inflation and improved customer enquiries.
Japan: Stronger service sector growth contrasts with deeper manufacturing downturn
The headline au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index™ (PMI)® dropped to 47.4 in February from a final reading of 48.9 in January, signalling a solid deterioration in the health of the sector, and one that was the sharpest for two-and-a-half years. The decline in business conditions mainly reflected steeper reductions in output and new orders, which both fell to the greatest extents since July 2020. More positively, cost and supply pressures showed further signs of easing and manufacturers continued to raise their staffing levels slightly, extending the current sequence of job creation to 23 months.
The au Jibun Bank Flash Japan Services Business Activity Index signalled sustained growth in the service sector during February, rising to 53.6 from a final reading of 52.3 in January. Services activity has now increased in each of the past six months, with the latest solid expansion the fastest since June last year as the most recent wave of the COVID-19 pandemic subsided.
New order growth also quickened, while new business from abroad increased slightly. Employment ticked down for the second month running. The combination of stronger new order inflows and falling staffing levels meant that outstanding business accumulated to the greatest degree since the survey began in September 2007. Meanwhile, rates of both input cost and output price inflation quickened from the start of the year. Higher fuel and wage costs were widely mentioned by respondents.
U.S. Home Sales Fall for 12th Straight Month Sales of previously owned homes dropped 0.7% in January to slowest level since October 2010
Sales of previously owned homes, which make up most of the housing market, fell 0.7% in January from the prior month to a seasonally adjusted annual rate of 4 million, the slowest since October 2010, the National Association of Realtors said Tuesday. January sales fell 36.9% from a year earlier.
January’s decline marked the longest streak of back-to-back monthly declines on record in figures going back to 1999, NAR said. (…)
The average rate on a 30-year fixed mortgage rose to 6.32% last week, the biggest one-week increase in four months. (…)
The national median existing-home price rose 1.3% in January from a year earlier to $359,000, NAR said, the smallest annual price gain since February 2012. Prices fell month-over-month for the seventh straight month after reaching a record high of $413,800 in June. [That’s -13.3%]. (…)
Nationally, there were 980,000 homes for sale or under contract at the end of January, up 2.1% from December and up 15.3% from January 2022, NAR said. At the current sales pace, there was a 2.9-month supply of homes on the market at the end of January.
The typical home sold in January was on the market for 33 days, up from 26 days from the prior month, NAR said.
The share of first-time buyers in the market was 31% in January, up from 27% a year earlier. About 29% of January existing-home sales were purchased in cash, up from 27% in the same month a year ago, NAR said. (…)
Canada: Core Inflation Moderates Further
Headline CPI inflation rose 0.3% MoM and declined 0.4pp to +5.9% YoY in January. Core CPI: +0.1% MoM after +0.3% in December, +4.9% YoY in January from +5.3% in December. The average of the BoC-preferred CPI-trim and CPI-median: +5.05% YoY.
On a three-month average basis, both BoC-preferred CPI-trim and CPI-median core measures are at +3.5% and falling towards the target range.
Core goods inflation moderated to -0.1% MoM (vs +0.4% in December). Durable goods inflation: -1.1% vs. flat.
Services inflation declined to +0.2% in January (vs +0.3% in December).
(NBF)
China: Road congestion surged as the country reopened.
Source: Barclays Research via The Daily Shot)
Walmart, Home Depot Give Cautious Outlook as Shoppers Spend More on Basics Home Depot’s pandemic-fueled growth stalls, while Walmart’s sales lifted by low-margin groceries
(…) “Customers are still spending money,” said Walmart Chief Executive Doug McMillon. “It’s obviously not as clear to us what the back half of the year looks like.”
Walmart said U.S. comparable sales, those from stores and digital channels operating for at least 12 months, rose 8.3% in the quarter ended Jan. 27, compared with the same period a year earlier. That beat analyst expectations of 4.9% growth, according to estimates from FactSet. (…)
December was the largest sales volume month in the retailer’s history, the company said. Sales of some nonfood items fell in the latest quarter, as shoppers gave priority to spending on everyday needs. Elevated prices also boosted sales by dollar amount. (…)
The company’s U.S. inventory fell 2.6% in the quarter, but is still elevated in some categories such as apparel, said Walmart U.S. Chief Executive John Furner on a call with analysts Tuesday.
The retailer said it expects U.S. comparable sales to increase by between 2% and 2.5% for the full year, excluding fuel sales. (…)
On Tuesday, Home Depot set a cautious tone. Sales for the most-recent quarter fell slightly after years of pandemic-fueled growth. The home-improvement retailer said sales for the current year would be flat. (…)
BTW: Walmart’s U.S. e-commerce sales rose 17% last quarter from a year earlier. Sales at all non-store retailers were up 8.1% YoY for the 3 months ended in January.
Investors increase bets on ECB lifting rates to all-time high Buoyant service sector and wages fuel expectations of further rises in eurozone borrowing costs
China’s Xi Jinping Plans Russia Visit as Putin Wages War in Ukraine Chinese leader is expected to use Moscow trip to push for multiparty peace talks
Chinese leader Xi Jinping is preparing to visit Moscow for a summit with Russia’s president in the coming months, according to people familiar with the plan, as Vladimir Putin wages war in Ukraine and portrays himself as a standard-bearer against a U.S.-led global order.
Beijing says it wants to play a more active role aimed at ending the conflict, and the people familiar with Mr. Xi’s trip plans said a meeting with Mr. Putin would be part of a push for multiparty peace talks and allow China to reiterate its calls that nuclear weapons not be used. (…)
Mr. Xi could visit in April or in early May, they said, when Russia celebrates its World War II victory over Germany, an event that the Kremlin last year used to liken Ukraine’s elected leaders to Nazis. (…)