Pace of U.S. Recovery Picked Up This Fall, Fed’s Beige Book Says Report says growth began to slow in November in parts of Midwest and Northeast as coronavirus cases increased
(…) four [of 12] regional Fed branches reported “little or no growth,” and four noted that activity began to slow in early November [Philadelphia district and 3 Midwest districts]. (…)
Banks reported deterioration in loan portfolios—particularly commercial lending to retail, hospitality and leisure businesses—and expectations of an uptick in delinquencies became more widespread, the Beige Book added. (…)
The U.S. Services PMI is out later today. Employment tomorrow.
Eurozone: Downturn in services drives fall in private sector output
Driven by sharply reduced services activity, the eurozone’s private sector economy returned to contraction during November for the first time in five months. This was signalled by the IHS Markit Eurozone PMI® Composite Output Index which recorded a level of 45.3, down from October’s 50.0 but slightly better than the earlier flash reading.
The headline figure was driven lower by a downturn in service sector activity which fell to the greatest degree since May. In contrast, manufacturing output growth was sustained for the fifth month in a row, albeit at the slowest pace since July.
Regional manufacturing gains were principally driven by Germany, which was subsequently the only nation to record an increase in overall private sector output during November. That said, growth was still the weakest in five months.
All other nations covered by the survey recorded a decline in activity. France, Italy and Spain all registered sharp contractions that were each the greatest recorded since the severe declines seen in May. Meanwhile, Ireland saw activity decline comparatively modestly.
The downturn in private sector output was closely linked to restrictions on activity related to continued efforts to stem the spread of global coronavirus disease 2019 (COVID-19). With mobility and social contact restricted, new business volumes inevitably fell in November.
The overall fall in new work was the greatest recorded by the survey since May, with notable weakness in sectors such as hospitality and tourism. There were also a decline in new export business, albeit only marginally, for the first time in three months.
The lack of incoming new work enabled companies to again keep on top of their backlogs of work, which fell in November for a twenty-first successive month, and to the greatest degree since June.
Employment fell for the ninth month running, albeit at the weakest rate in this sequence with modest declines in both manufacturing and services. Job losses were most notable in Italy and Spain, while staffing rose slightly in Germany. There was little change in Ireland, whilst a modest reduction in jobs was seen in France.
Meanwhile, input prices increased for a sixth successive month during November. The rate of inflation was solid, albeit a little lower than in the previous survey period. In contrast, output charges declined again, extending the current period of deflation to nine months.
Finally, looking ahead to the next 12 months, confidence about the future improved noticeably as firms were encouraged by recent COVID-19 vaccine developments. Optimism did, however, remain well below its long-term trend.
The IHS Markit Eurozone PMI® Services Business Activity Index fell sharply during November, declining to a level of 41.7 from 46.9 during October. Posting below the 50.0 no-change mark for a third successive month, the index signalled the sharpest contraction in services activity since May.
Led by France, Italy and Spain, all five countries covered by the survey recorded declines in activity as local restrictions designed to curb COVID-19 weighed on business activity.
Overall volumes of incoming new work fell for a fourth successive month, and also to the sharpest degree since May. Both domestic and external demand sources declined, with new export business again declining to a considerable degree.
Maintaining the trend recorded by the survey since March, job losses in the services economy were also recorded during November, albeit modestly and at a rate amongst the lowest in the current sequence. All nations recorded a decline in staffing levels with the exception of Germany, were growth in employment hit its highest since February.
Price pressures in the services economy remained mild during November, with only a modest increase in input costs recorded. Charges were again cut, with services providers responding to the challenging business environment by offering discounts.
Sentiment about the future improved during November, with confidence improving in all five nations monitored. Spanish service providers were the most optimistic about the future.
Chris Williamson, Chief Business Economist at IHS Markit:
(…) this is a decline of far smaller magnitude than seen in the spring. Unlike earlier in the year, manufacturing has so far continued to expand, buoyed in part by recovering export demand, and the service sector is also seeing a much shallower downturn than during the first lockdowns.
The relative resilience of services in part reflects spill-over demand from the manufacturing sector for transport and other industrial support services, but also reflects the looser lockdown measures compared to those seen earlier in the year.
The fourth quarter will nevertheless likely see the eurozone economy take another major step backwards, with especially steep downturns suffered in France, Spain and Italy.
Encouragingly, growth expectations have lifted higher, as vaccine developments fuel optimism that life can start to return to normal in 2021. It’s anticipated that business and consumer spending will start to rise as the outlook brightens, though a high degree of caution is expected to persist for some time to come.
China Service sector activity soars in November
Activity in China’s service sector increased at a substantial pace in November amid reports of greater customer demand and a sustained recovery of market conditions after the coronavirus disease 2019 (COVID-19) outbreak. Furthermore, total new business expanded at the quickest rate since April 2010, while business confidence improved to the highest for over nine-and-a-half years. Rising activity and sales underpinned the fastest increase in employment for just over a decade. However, operating expenses rose at a sharp and accelerated rate,which led to a quicker increase in prices charged.
The headline seasonally adjusted Business Activity Index rose from 56.8 in October to 57.8 in November and pointed to a substantial expansion of services activity. Furthermore, the rate of growth was the second-quickest since April 2010, exceeded only by that recorded in June 2020. The latest reading extended the current sequence of rising business activity to seven months as the sector continued to see a strong recovery from the COVID-19 outbreak earlier in the year.
Improved growth momentum was accompanied by a faster increase in overall new orders during November. Moreover, the latest upturn in sales was the quickest since April 2010. New export business meanwhile rose for the first time since June, and at the sharpest rate since April 2019. Panel members frequently commented on greater customer numbers both at home and overseas, amid a sustained recovery in overall market conditions. Efforts to expand capacity and rising order volumes led companies to increase their staffing levels for the fourth month in a row. Notably, the rate of job creation was the most marked since October 2010 and solid.
Higher workforce numbers helped to alleviate some pressure on capacities, as shown by a drop in the level of outstanding business.That said, the rate of backlog depletion was only marginal.
Average operating expenses rose further in the latest survey period,with the rate of inflation picking up notably since October. The latest upturn in input costs was the most marked since August 2010 and sharp overall. Anecdotal evidence generally associated the rise to higher raw material and staffing costs.
Firmer demand conditions enabled firms to partially pass on their increased cost burdens to clients in the form of higher output prices. Furthermore, the rate of charge inflation was the steepest for just over ten-and-a-half years.
Business confidence regarding the year ahead strengthened for the third month running in November. The overall degree of positive sentiment was in fact the highest since April 2011 and above the series average. Companies widely expect global economic conditions to recover from the pandemic over the next year, while firmer domestic demand and new product launches are also expected to boost activity levels.
Chinaflation
From the China Services PMI release:
Inflation pressure became evident. Strong demand in the job market and a rise in raw material costs pushed up input prices, which in turn led to a rise in the prices charged by service providers. The measures for input prices and prices that businesses charged both rose further into expansionary territory, hitting the highest readings since August 2010 and February 2010, respectively.
Total input cost inflation picked up to a 34-month high in November, which led to a stronger rise in prices charged by Chinese companies.
U.S. Deaths Hit Daily Record as Newly Reported Cases Surge The daily death toll passed 3,000 and newly reported infections were at their second highest, topping 200,000 for the second time in less than a week.
High number of cases throughout the USA, unlike in spring and summer:
Cases have jumped lately among the larger states; hospitalizations are about to skyrocket:
NBF gives us a global look:
Covid-19 Stimulus Efforts Pick Up Speed in Congress Democratic leaders signaled readiness to reduce their demands for the next round of coronavirus relief, fueling hopes that an agreement could be reached with Republicans by year’s end.
House Speaker Nancy Pelosi (D., Calif.) and Sen. Chuck Schumer of New York, the chamber’s Democratic leader, said that a new, bipartisan $908 billion coronavirus relief proposal released Tuesday should serve as the starting point for talks to try to resolve months of disagreement with GOP leaders and the White House.
“Of course, we and others will offer improvements,” Mrs. Pelosi and Mr. Schumer said in a joint statement, “but the need to act is immediate and we believe that with good-faith negotiations we could come to an agreement.” (…)
GOP leaders haven’t yet publicly moved toward Democrats in the renewed negotiations. Earlier Wednesday, Treasury Secretary Steven Mnuchin said the White House backed a GOP offer released Tuesday. That proposal, similar to Senate Republicans’ previous $519 billion bill, includes more funding for small businesses, legal protections for entities operating during the pandemic and a one-month extension of expanded unemployment-insurance programs that expire at the end of December. It doesn’t include Democrats’ desired funding for state and local governments. (…)
The bipartisan proposal would run through March 2021. It includes $160 billion in state and local funding, sought by Democrats, and gives a nod to one of Republicans’ top priorities: legal protections for businesses and other entities. Lawmakers said they would provide a short-term suspension of liability lawsuits related to Covid-19 at the state or federal level, giving states time to put in place their own protections.
The proposed package also includes $288 billion for small-business relief, including for the Paycheck Protection Program, $16 billion for the distribution of a coronavirus vaccine, $82 billion for schools, $25 billion for rental assistance and $180 billion for additional unemployment insurance, including $300 a week through March, aides said. In addition, the plan would give $17 billion to airlines. (…)
OPEC, Allies Near Agreement for Small Production Increase The oil cartel and its allies are closing in on an agreement to modestly boost their collective oil output by as much as 500,000 barrels a day starting next month, people familiar with the matter said.
The CFO Survey Shows Expectation of Slow Recovery
SENTIMENT WATCH
Via CMG Wealth:
- 13/34–Week EMA Trend: extended, but still extending:
- Almost never gets more extended:
- Crowd and Trading Sentiment per NDR are also pretty extended:
