US initial jobless claims dropped -2k to 222k in the week ending December 28, slightly below expectation of 225k. Four-week moving average of initial claims rose 4.75k to 233.25k.
Continuing claims rose 5k to 1.728m in the week ending December 21. Four-week moving average of continuing claims rose 7.25k to 1.712m.
UK PMI Manufacturing was finalized at 47.5 in December, down from November’s 48.9. It’s the second weakest level for almost seven-and-a-half years (the PMI stood at 47.4 in August 2019). Also, the index has posted below the neutral mark of 50.0 in each of the past eight months.
Rob Dobson, Director at IHS Markit, which compiles the survey:
“The UK manufacturing sector took a turn for the worse at the end of 2019. Output fell at the quickest pace in seven-and-a-half years as new order inflows decreased and Brexit safety stocks were reduced. With demand weak and confidence remaining subdued, input purchasing was pared back sharply and jobs cut for the ninth successive month.
“The downturn is still being hardest felt at companies reliant on investment and business-to-business spending. The steepest reduction in output was at investment goods producers, as continued uncertainty meant new orders and new export business suffered the steepest contractions in over a decade. Intermediate goods producers also experienced marked drops in output and new work received. There was a pocket of growth, however, as consumer goods production edged higher. On this basis, it looks like UK manufacturing and the broader economy may both start the new decade as they began the last, too reliant on consumer spending and still waiting for a sustained improvement in investment levels.”
Eurozone PMI Manufacturing was finalized at 46.3 in December, down from November reading of 46.9. Markit noted there were accelerated falls in both output and new orders. Also, there was prevalence of spare capacity that led to further job losses.
Looking at the member states, Germany PMI Manufacturing was finalized at 43.7, a two month low. Italy and and the Netherlands dropped to 80-month lows at 46.2 and 48.3 respectively. France reading dropped to 3 month-low of 50.4.
Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“Eurozone manufacturers reported a dire end to 2019, with output falling at a rate not exceeded since 2012. The survey is indicative of production falling by 1.5% in the fourth quarter, acting as a severe drag on the wider economy.
“Although firms grew somewhat more optimistic about the year ahead, a return to growth remains a long way off given that new order inflows continued to fall at one of the fastest rates seen over the past seven years. Firms sought to reduce inventory levels and cut headcounts as a result, focusing on slashing capacity and lowering costs. Such cost cutting was again also evident in further steep falls in demand for machinery, equipment and production-line inputs.
“Only households provided any source of improved demand in December, underscoring how the consumer sector has helped keep the economy out of recession in recent months. The ability of the wider economy to avoid sliding into a downturn in the face of such a steep manufacturing contraction remains a key challenge for the eurozone as we head into 2020.”
China Caixin PMI Manufacturing dropped to 51.5 in December, down from 51.8, missed expectation of 51.7.
Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “China’s manufacturing economy continued to stabilize in December, although the expansion in demand was not as strong as the previous two months. Positive changes included improved business confidence, and strengthened willingness to increase production and inventories, which are beneficial to the job market. Subdued business confidence was a major factor behind the economic slowdown this year. As the phase one trade deal between China and the U.S. has sent out positive signals, there is room for a recovery in business confidence, which should be able to help stabilize the economy.”
China’s PBoC announced yesterday to cut the reserve requirement ratio (RRR) by 50bps to 12.5%, effective January 6. That’s the eight cuts since early 2018, for releasing more funds for lenders to support the slowing economy. The reduction is expected to release around CNY 800B (USD 115B) of long term liquidity. Also, the move would offset cash demand ahead of Lunar New Year, keeping the liquidity of the banking system stable.
Outlook seemed to have improved recently as data showed stabilization. Meanwhile, China is expected to sign the phase one trade deal with the US, likely on January 15. Yet, more support measures are still expected as growth would likely cool further in 2020.
Conference Board US Consumer Confidence dropped slightly to 126.5 in December, down from upwardly revised 126.8, missing expectation of 128.0. Present Situation Index rose from 166.6 to 170.0. Expectations Index dropped from 100.3 to 97.4.
“Consumer confidence declined marginally in December, following a slight improvement in November,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “While consumers’ assessment of current conditions improved, their expectations declined, driven primarily by a softening in their short-term outlook regarding jobs and financial prospects. While the economy hasn’t shown signs of further weakening, there is little to suggest that growth, and in particular consumer spending, will gain momentum in early 2020.”
US President Donald Trump announced in Twitter that he’s going to sign the phase one trade with with China on January 15. White House will be the location, with high level representatives of China present. Though, there was no mentioning of Chinese President Xi Jinping.
Trump added that he will go to Beijing at a later date to kick start phase two negotiations.
By loading the tweet, you agree to Twitter’s privacy policy.
Learn more
Starting on January 1, US Dollar’s weighting in the China Foreign Exchange Trade System (CFETS) RMB Index would be lowered. CFETS is overseen by the PBoC and the RMB index measures the value of Yuan against a basket of 24 major currencies, with weights based on international trade.
After the adjustment, Dollar’s weighting will be lowed from 22.4% to 21.59%. Euro’s weighting will be increased from 16.34% to 17.40%. CFETS said the adjustment was to make the index more representative, taking into account trade data from 2018.
The official Chinese PMI Manufacturing was unchanged at 50.2 in December, slightly above expectation of 50.1. PMI Non-Manufacturing dropped to 53.5, down from 54.4, missed expectation of 53.6.
Special analyst Zhang Liqun said there was signs of stabilization but “foundation still needs to be consolidated”. Also “efforts should continue to be made to implement the various policies and measures to achieve the “six stability” and to strengthen the foundation for economic stability as soon as possible.
Wen Tao of Logistics Information Center noted the effect of release of market demand during the holidays. Also, there are productions of consumer goods ahead of Chinese New Year.
White House trade adviser Peter Navarro talked down speculations that China’s trade delegation to travelling to the US to sign the trade deal this week. He told Fox on Monday, “never believe reports on anonymous sources”. Instead, people should get the news from President Donald Trump or trade representative Robert Lighthizer.
Though, he noted that “we’ll probably have a signing on that within the next week or so – we’re just waiting for the translation”. “Basically you need to get it translated into the Chinese and double-checked so both versions match,” he added.
The deal would be made public “as quickly as possible”. And, that would be a “good start” on forced technology transfers, with details on IP protection, and “some good language” on currency manipulations”.
US Goods Trade Deficit narrowed -5.4% mom to USD 63.2B in November, much smaller than expectation of USD -69.2B. Goods exports rose USD 0.9B over the month to USD 136.4B. Goods imports dropped USD -2.7B to USD 199.6B.
Also released, wholesale inventories was unchanged in November, versus expectation of 0.3% mom rise.
The SCMP in Hong Kong reported that Chinese Vice Premier Liu He would lead a delegation to Washington this Saturday to sign the phase one trade deal with the US. The delegation is then expected to stay in the US for a few days, before leaving in the middle of next week. At this point, there is no confirmation for the arrangement yet.
The news is somewhat consistent with US Trade Representative Robert Lighthizer’s comment on December 13, that the deal would be signed “in the first week of January. Nevertheless, it’s inconsistent with President Donald Trump’s comment that there will be a signing ceremony when he and Chinese President Xi Jinping “get together”.
EU Trade Commissioner-designate Phil Hogan told the Irish Times that he’s “seeking a reset” of the trade relationship with US. In particular, he noted that steel aluminum tariffs and threat of tariffs in response to a digital tax in Europe.
Hogan spoked with US Trade Representative Robert Lighthizer just before Christmas. He added, “We agreed to meet in Washington in mid-January to discuss the long list of issues causing strain in the relationship between the EU and the US. There is no point in getting into the details of resolving trade irritants unless we agree a line on a common trade agenda.”
Swiss KOF Economic Barometer rose to 96.4 in December, up from 92.6, beat expectation of 94.5. The indicator has now fully recovered the decline this year, back to the closing level in 2018. Nevertheless it’s still below it’s long run average. And KOF said “the outlook for the Swiss economy at the beginning of 2020 is brightening somewhat, but remains subdued.
KOF added: “The distinct increase is primarily due to bundles of indicators from the manufacturing sector. Positive signals also result from indicators covering other services and foreign demand. Indicators concerning private consumption as well as hotel and catering activities show a moderate increase.”
In an interview with Chinese state television CGTN on Saturday, China’s ambassador to US Cui Tiankai urged US to “honor their commitment” on one-China policy. Meanwhile, he also claimed that “we always honor our commitment” regarding trade.
Cui emphasized a “local election in Taiwan is a local election in Taiwan, province of China. As far as the US is concerned, the US has made commitments to the one-China policy in the three joint communiques between China and the US, and I just hope they will honour their commitment”.
He added that “the bottom line is the one-China principle. There is only one China in the world. Both Taiwan and the Chinese mainland are part of China. China’s sovereignty and territorial integrity should not be violated.”
On trade, Cui said, “as far as we are concerned, we always honour our commitment. We will always implement what we promised. There is no problem about that”. And, “I’m confident that since we have spent so much time with such great efforts at reaching this agreement, I think it would certainly serve the interests of both sides if this agreement is implemented.”
On Sunday, US military carried out air strikes in Iraq and Syria, against the Kataib Hezbollah militia group which is Iran-backed. That was in response to killing of a US civilian contractor in a rocket attack on an Iraqi military base.
US Secretary of State Mike Pompeo told reports that “we will not stand for the Islamic Republic of Iran to take actions that put American men and women in jeopardy.” Defense Secretary Mark Esper said the strikes were “successful” warned of “additional actions as necessary to ensure that we act in our own self-defense and we deter further bad behavior from militia groups or from Iran.”
North Korea somewhat catches some attention in a very quiet start to the week, end to the year. State media KCNA reported that, on Sunday, leader Kim Jong Un emphasized the need to take “positive and offensive measures for fully ensuring the sovereignty and security of the country”. Kim said that at the largest plenary session of the Workers’ Party since 2013.
Separately, ABC reported that North Korea promised to deliver a “Christmas gift” to the US. Some saw that as echoing the “positive and offensive measures” and could point to some long-range missile tests, or even more nuclear weapons tests.
On the issues, White House national security adviser Robert O’Brien said: “We’ll reserve judgment, but the United States will take action as we do in these situations. If Kim Jong Un takes that approach, we’ll be extraordinarily disappointed and we’ll demonstrate that disappointment.”
European Commission President Ursula von der Leyen told German Der Spiegel that she’s worried about UK’s schedule to complete negotiations of future relationship by end of 2020. She said, “that worries me a lot, because time is extremely short for the mass of issues that have to be negotiated.”
Separately, she told French daily Les Echo that both sides need to needed to seriously assess if there is enough time to complete trade negotiations. And, “it would be reasonable to evaluate the situation mid-year and then, if necessary, agree on extending the transition period.”
ECB said in its monthly economic bulletin that more recent information “points to a stabilisation in global growth”. In particular, survey-based data like PMI point to a “moderate recovery in manufacturing output growth and some moderation in services output growth”. Nevertheless, global recovery is projected to be “shallow”, reflecting moderation of growth in advanced economies and sluggishness in some emerging markets.
For Eurozone, however, ongoing weakness of international trade continues to weigh on manufacturing sector and is dampening investment growth. Survey-based data, while remaining weak overall, point to some stabilization of slowdown too.
Measures of underlying inflation in Eurozone “generally remained muted”. ECB added, that “market-based indicators of longer-term inflation expectations have remained at very low levels, while survey-based expectations also stand at historical lows.
ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for over a decade. Empowering the individual traders was, is, and will always be our motto going forward.
Contact us: contact@actionforex.com
© ActionForex.com © 2024 All rights reserved.
Canada PMI manufacturing dropped to 50.4, disappointing end to 2019
Canada PMI Manufacturing dropped to 50.4 in December, down from 51.4, hitting a four-month low. Markit noted there was slower output growth amid fall in new orders. Subdued rate of job creation continued. Also, Business optimism dropped to its weakest since February 2016.
Commenting on the PMI data, Tim Moore, Economics Associate Director at IHS Markit said:
“December data revealed a disappointing end to 2019 for the Canadian manufacturing sector as the steady recovery in production volumes stalled, while new orders fell back into decline.
“Weakness in the investment goods category linked to softer capital spending at home and abroad remained a key factor behind the subdued manufacturing trend. Consumer goods producers once again fared better than elsewhere in the industrial sector, but even this outperforming area reported a growth slowdown at the end of 2019.
“It appears that manufacturers are braced for a lack of new work to replace completed projects in the New Year, with business optimism now at its lowest for almost four years and job creation moving closer to stagnation in the latest survey period.”
Full release here.