Note: I am in California for the next 3 weeks. Time zone, family matters and limited equipment could have an impact on the frequency, quantity and, perhaps, quality of my blogging.
FLASH PMIs
USA: Private sector expansion remains marked despite growth being stymied by labour shortages and material delays
US private sector firms signalled a sharp upturn in business activity during November, despite the rate of expansion slowing from October. Softer overall growth was largely led by the service sector, as manufacturers posted a slightly stronger increase in production. Nevertheless, pressure on capacity remained stark as labour and material shortages weighed on the private sector.
Adjusted for seasonal factors, the IHS Markit Flash US Composite PMI Output Index posted 56.5 in November, down from 57.6 in October. Although stronger than the lows seen in August and September, rising prices, poor input availability and challenges finding suitable candidates for vacancies reportedly held back the overall expansion.
New business growth remained buoyant in November, despite some companies highlighting slower demand conditions compared to earlier in the year. The rate of upturn was broadly in line with the historic average, with manufacturers registering a sharper rise in new orders. New export business returned to growth in November, as goods producers and service providers saw sales from abroad increase.
The level of outstanding business rose at the second-sharpest pace on record (since October 2009), slipping only slightly from October’s series high. Both manufacturing and services recorded marked upturns in backlogs of work amid further severe supply chain delays and labour shortages. The rate of job creation was solid overall, but many firms noted outstanding vacancies which had not been filled for several months.
At the same time, the rate of input price inflation reached a new series high midway through the final quarter. Sharper increases in cost burdens at both manufacturers and service providers led to soaring prices, with a vast range of materials reported as having risen in cost. The pace of selling price inflation matched October’s series record high, as firms sought to pass on greater costs to their customers.
Meanwhile, business confidence ticked higher. A sustained period of strong client demand, further easing of COVID-19 restrictions and the acquisition of new customers supported optimism.
The seasonally adjusted IHS Markit Flash US Services PMI™ Business Activity Index fell to 57.0 in November, down from 58.7 in October. Nevertheless, service sector firms signalled a sharp upturn in output, with the rate of expansion remaining historically elevated. Many firms noted that the uptick in business activity was supported by greater travel both domestically and internationally and the further easing of COVID-19 restrictions.
New business rose solidly in November, as firms acquired new clients and new projects. That said, the pace of increase slowed to be among the slowest since August 2020. Total sales were boosted by a renewed expansion in new export orders, however.
Inflationary pressures continued to soar midway through the fourth quarter, as the rate of increase in input prices quickened to a six-month high. A combination of marked supplier price hikes and vast increases in wage bills reportedly drove cost burdens up. Firms were able to partially pass on higher costs though, as the rate of charge inflation reached a fresh series high.
Meanwhile, pressure on capacity persisted amid labour shortages, with backlogs of work rising at the second-fastest pace on record. Firms sought to expand their workforce numbers, but employment growth was held back by challenges finding suitable candidates.
The health of the manufacturing sector improved at a steeper pace in November, as highlighted by the IHS Markit Flash US Manufacturing Purchasing Managers’ Index™ (PMI™) picking up to 59.1 midway through the final quarter, up from 58.4 in October. That said, production continued to be hampered by raw material delays and labour shortages, with vendor performance deteriorating substantially yet again.
Nonetheless, the rise in output accelerated from October, as inflows of new orders expanded at a sharper pace. As numerous critical components remained in short supply, many goods producers noted dwindling stocks of finished goods, with post-production inventories falling at the quickest pace since May 2020. A sustained period of marked upturns in input purchasing led to a strong increase in pre-production inventories. Some companies noted that stocks of common items were boosted to avoid future shortages.
Subsequently, the severe lengthening of input delivery times led to an acceleration in the accumulation of backlogs of work in November. A high turnover of staff and challenges hiring suitable workers exacerbated pressure on capacity, with employment rising at the slowest pace in 2021 so far.
In line with difficulties sourcing inputs and finding affordable transportation for goods, cost burdens rose at a series record pace in November (since May 2007). In an effort to pass on higher costs to customers, firms increased their selling prices at the second-steepest pace in over 14-and-a-half years of data collection.
Finally, output expectations for the year ahead strengthened to the highest for three months amid hopes of increased stability across labour markets and supply chains.
Faster eurozone economic upturn marred by record inflationary pressures and COVID-19 worries
Eurozone business activity growth accelerated in November having slipped to a six-month low in October, according to provisional flash PMI® data. The upturn was accompanied by a further marked increase in inflationary pressures during the month, as firms’ costs and average selling prices charged for goods and services both rose at record rates.
Although the rate of job creation rose to the second-highest in over 21 years as firms sought to meet rising demand, optimism about the outlook sank to a ten-month low on renewed COVID-19 worries and lingering supply constraints. The headline IHS Markit Eurozone Composite PMI rose for the first time in four months in November, climbing from 54.2 in October to 55.8 according to the ‘flash’ reading. Although indicating an improvement in the rate of growth from October’s six-month low and remaining above the survey’s pre-pandemic long-run average of 53.0, the average reading for the fourth quarter so far, at 55.0, is substantially lower than the 58.4 average seen in the third quarter, pointing to a weakening of economic growth in the closing quarter of 2021.
By sector, services outperformed manufacturing for a third straight month, recording the strongest growth of activity for three months. Growth also picked up in manufacturing, though remained the second-weakest seen over the past 17 months.
Both sectors saw growth improve on the back of slightly stronger inflows of new business, yet in both cases rates of growth of demand remained well below that seen during the summer months.
In manufacturing, growth was held back in particular by a third successive monthly drop in production in the autos sector. More positively, especially robust expansions were seen for tech equipment, food & drink and household goods.
In the service sector, the weakest performance was recorded for tourism & recreation, where growth hit the lowest since May due primarily to rising virus infection rates.
By country, growth accelerated in Germany and France, with the latter recording the stronger expansion for the second month in a row thanks to the sharpest rise in services activity for nearly four years, which offset a second successive monthly drop in factory output. The rest of the region as a whole meanwhile enjoyed faster growth of both manufacturing and services than seen in France and Germany.
Especially weak factory output growth was again seen in Germany alongside a subdued service sector expansion, though in both sectors the rate of growth improved on October.
Weak factory output growth was again commonly attributed to supply constraints. Suppliers’ delivery times continued to lengthen at one of the steepest rates seen over more than two decades of survey history, easing only modestly compared to October, amid ongoing supply shortages and transport problems.
Fears over supply issues contributed to further inventory building by manufacturers, with November seeing a record build-up of warehouse stocks for the second month running as firms increased their purchases of available inputs.
Despite hiring stepping up across both manufacturing and services, resulting in the second-largest gain in employment recorded over the past 21-years, backlogs of work continued to rise at an elevated pace, increasing at the sharpest rate for three months to hint at ongoing constraints. Backlogs rose most sharply in manufacturing, led by Germany, but also grew to an increased extent in services.
Shortages were meanwhile once again seen as a principal driver of higher prices for many goods and services, alongside higher shipping costs, rising energy prices and increases in staff costs. November consequently saw a survey record increase in firms’ input costs for a second successive month, with unprecedented rates of inflation seen in both manufacturing and services.
Selling price inflation likewise accelerated in both manufacturing and services to the fastest in almost two decades of comparable survey history as firms sought to pass higher costs on to customers, most notably in Germany.
Finally, future output expectations deteriorated to the lowest since January. Ongoing concerns over supply chain issues were exacerbated by growing worries about the impact of further COVID-19 waves, which darkened the outlook for services in particular. Optimism in manufacturing improved from October’s one-year low, though remained subdued by supply and price worries.
U.S., Others to Tap Oil Reserves in Bid to Tame Inflation The U.S. and several other countries will tap their national strategic petroleum reserves, senior Biden administration officials said, in an attempt to bring down rising gasoline prices.
(…) The last globally coordinated release came in 2011 when the U.S. and 27 other countries agreed to release 60 million barrels to replace some of 140 million in output lost as a result of three months of conflict in what would become Libya’s civil war. (…)
Most of the 50 million barrels going out from the reserve—a total of 32 million—are part of exchanges designed just for a short-term boost to supply. Under this plan, the Energy Department will trade barrels in December with buyers who will agree to send barrels back to the government sometime between 2022 to 2024, to replenish the reserve later.
The other 18 million barrels of the release will come as part of a previously authorized sale from the reserve, which the Energy Department is now moving to do earlier than it had planned. (…)
There have been only three previous stockpile releases coordinated globally, all when oil or gasoline supplies were disrupted by war in major oil exporting countries or by Hurricane Katrina’s hit on the U.S. Gulf Coast’s oil industry in 2005.
Now, global oil output is about to rise, the International Energy Agency said last week. (…)
- Bloomberg: At 50 million barrels, Tuesday’s announced action represents one of the largest-ever release from U.S. reserves, eclipsing past interventions that saw the U.S. putting 30 million barrels onto the world market. It also surpasses the rapid drawdown of 33.75 million barrels that was ordered in 1991, amid Operation Desert Storm.
- OPEC+ officials warned they’re likely to respond by canceling plans to boost their own production, negating the addition of stockpiled oil onto the market. The standoff sets up a fight for control of the global energy market.
- J.M. Smucker Reports Higher Sales Amid Price Increases The food manufacturer said its net sales rose to $2.05 billion in its fiscal second quarter, as higher prices and demand helped it navigate higher costs and supply chain challenges. Higher prices in manufacturing, transportation, ingredient and packaging costs continued to weigh on gross margin in the period, falling to 34.7% from 40.2% a year earlier.
- Best Buy forecasts holiday quarter sales below estimates as supply issues loom
- Best Buy Tumbles After Joining Retailers in Posting Decline in Gross Margin
- British Columbia Flood Lifts Lumber Prices
- Inflation Is Raging Everywhere, But It’s Worst in Latin America
From pilots to ramp agents – U.S. airlines go all out to staff up
From offering premium pay to hefty signing bonuses or poaching workers from other airlines, American carriers are scrambling to ramp up staffing for the holiday season and prevent disruptions that marred air travel this summer. (…)
Piedmont Airlines, American’s subsidiary, is trying to lure pilots with a $180,000 bonus offer. United Airlines (UAL.O) is offering a $5,000 signing bonus for a ramp agent position in Boston. (…) Piedmont’s flight attendants last month voted to authorize a strike, demanding better pay and benefits. “We are fighting for a livable wage,” said Johnson.
Spirit Airlines (SAVE.N) has bumped up wages for its ramp agents by 30%. The ultra-low-cost carrier is offering a one-time graduation bonus of $1,250 and up to $4,500 a year in tuition reimbursement to flight attendants. (…)
Southwest Airlines’ (LUV.N) wage expense as a percentage of revenue is up by 14 points this year versus 2019. There have been similar increases in salary costs at other carriers including United and American.
Yet headcount at U.S. scheduled air carriers in October was 14.3% below the pre-pandemic peak. By contrast, employment at restaurants and bars, struck equally hard by pandemic lockdowns, is just 6.4% below its peak before the COVID-19 outbreak. (…)
Faye Malarkey Black, head of the Regional Airline Association, said the supply of new pilots fell 60% in 2020. This year, it is about 36% below pre-pandemic levels, she said.
(…) one-fifth of the pilots at regional airlines are getting snatched away by big passenger and cargo carriers even before they can complete their mandatory training. (…)
New York Hotel Business Getting Little Boost From Holiday Season The city’s hotel owners have been hoping for a big year-end boost to their business as tourists start to return. But early indicators suggest limited holiday cheer for the beleaguered hospitality sector.
Strikes Sweep Labor Market as Workers Flex New Leverage Tens of thousands of American workers are on strike and thousands more are attempting to unionize.
(…) Starbucks baristas in New York state’s second-largest city are now voting on whether to unionize under Workers United Upstate New York, an affiliate of the Service Employees International Union. Workers said they have begun to receive and return ballots for the election overseen by the National Labor Relations Board. (…) Starbucks is one of many companies that has boosted wages for employees. The Seattle-based company said last month it was raising the average hourly pay to $17, up from roughly $14, by next summer for its U.S. staff. The company has said that increase in pay and other recent wage raises make up an additional $1 billion in spending on staff. (…)
Voting is now taking place in three stores. The Starbucks Workers United union petitioned earlier this month for three additional locations to hold votes as well. (…) Workers in other Starbucks markets said they are watching the Buffalo election closely. Some employees said they are agitating for improvements in their own areas, including in company stores in Orlando, Fla. and in Chicago.
U.S. Existing Home Sales Rise Unexpectedly in October
The National Association of Realtors (NAR) reported that sales of existing homes improved 0.8% (-5.8% y/y) in October to 6.340 million units (SAAR) following an unrevised 7.0% September gain to 6.290 million. October sales stood at the highest level since January of this year, up 9.7% since a May low. The Action Economics Forecast Survey expected a decline in sales to 6.20 million units in October. These data are compiled when existing home sales close.
Existing single-family home sales increased 1.3% (-5.8% y/y) in October to 5.660 million units after rising 7.7% in September. Sales of condos and co-ops declined 2.9% (-5.6% y/y) to 680,000 after increasing 1.4% in September.
Sales patterns varied across the country last month. In the Northeast, sales fell 2.6% (-13.8% y/y) to 750,000 units following a 5.5% September increase. Sales in the Midwest offset that decline and rose 4.2% (-6.3% y/y) to 1.500 million, the fourth firm gain in five months. Sales in the South improved 0.4% (-3.5% y/y) to 2.780 million units after an 8.6% September rise. Sales in the West held steady (-5.1% y/y) at 1.310 million units after rising 6.5% September.
The median price of an existing home rose 0.8% (13.1% y/y) to $353,900 in October. Prices in the Northeast fell 2.1% (+6.4% y/y) to $379,100 and in the Midwest they eased 1.3% (+7.8% y/y) to $259,800. In the South, home prices strengthened 3.3% (16.1% y/y) to $315,500 and in the West prices edged 0.2% higher (7.7% y/y) to $507,200. The price data are not seasonally adjusted
The number of existing homes on the market fell 0.8% (NSA) in October to 1.250 million units (-12.0% y/y). The supply of homes on the market held at 2.4 months, remaining well below the high of 4.6 months in May of last year and above the all-time low of 1.9 months reached last December. These figures date back to January 1999.
