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China PMI manufacturing rose to 52.6, highest since 2012

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    China official PMI Manufacturing rose from 50.1 to 52.6, above expectation of 50.7. That’s also the highest reading since April 2012. PMI Non-Manufacturing rose from 54.4 to 56.3, highest since March 2021. PMI Composite rose from 52.9 to 56.4.

    “In February, the economic stabilisation policy measures further took effect, coupled with the epidemic’s impact receding and other favourable factors, the speed of enterprises to resume production accelerated, meaning China’s economic prosperity level continued to rebound,” said senior NBS statistician Zhao Qinghe.

    Also released, Caixin PMI Manufacturing rose from 49.2 to 51.6 in February, slightly above expectation of 51.3. That the first expansion reading in 7 months, and the second-highest since May 2021. Caixin added there were renewed increases in output, new orders and employment. Suppliers’ delivery times improved at the quickest rate for eight years. Business confidence also strengthened to near two-year high.

    Full Caixin release here.

    UK PMI manufacturing finalized at 54.1, near-record supply-chain disruptions

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      UK PMI Manufacturing was finalized at 54.1 in January, down from December’s 3 year-high of 57.5. Markit said supply chains were stretched by Brexit and COVID restrictions. Input cost and selling price inflation both accelerated.

      Rob Dobson, Director at IHS Markit: “A mixture of harsher COVID-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs… The hope is that the current constraints will start to ease once COVID-19 restrictions are lifted, vaccines are rolled out and ports, suppliers and manufacturers adapt to the new trading environment post-Brexit. If so, supply, demand and production bottlenecks should slowly work through the system and growth will not be knocked too far off course through 2021. However, there is no swift end in sight to these headwinds, and the longer the current circumstances remain the greater the potential damage to the sector and its suppliers.”

      Full release here.

      China to end anti-dumping and anti-subsidy investigations of US sorghum

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        As the first day of US-China trade talk started, there are rumors flying around already. It’s reported that, according to a US official, China is offering to slash its trade surplus with the US by up to USD 200B year. (Btw, is that considered a leak?) It’s unclear for now how the total value was determined. But another source said the package could include Chinese tariffs on around USD 4B worth of US farm products.

        Meanwhile, the Chinese Ministry of Commerce just announced to end the “anti-dumping and anti-subsidy investigations of imported sorghum originating in the United States” in a statement here. Looks like there was some real progress made.

        UK CPI accelerated to 2.1%, but missed expectations

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          In April, UK headline CPI accelerated to 2.1% yoy, up fro 1.9% yoy but missed expectation of 2.2% yoy. Core CPI was unchanged at 1.8% yoy, also missed expectation of 1.9% yoy. RPI, however, jumped sharply to 3.0% yoy, up from 2.4% yoy and beat expectation of 2.8% yoy.

          ONS noted that rising energy prices and air fares, which were influenced by the timing of Easter, produced the largest upward contributions to change in the rate between March and April 2019. The largest, offsetting, downward contribution came from across a range of recreational and cultural items, which included computer games and package holidays.

          PPI input rose to 3.8% yoy, up from 3.7% yoy but missed expectation of 4.4% yoy. PPI output slowed to 2.1% yoy, down from 2.4% yoy and missed expectation of 2.3% yoy. PPI output core was unchanged at 2.2% yoy, matched expectations.

          Also from UK, house price index rose 1.4% yoy in March, well above expectation of 1.0% yoy. Public sector net borrowing rose GBP 5.0B in April.

          Australia NAB business confidence jumped to 13, but condition tumbled to 5

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            Australia NAB Business Confidence jumped sharply from -6 to 13 in September. Strong improvement was seen in New South Wales (up 52 pts to 27) and Victoria (up 16 pts to 5). Business Conditions, however, dropped from 14 to 5. Trading condition dropped from 20 to 10. Profitability condition dropped from 15 to 2. Employment confidence dropped from 9 to 1.

            NAB said, “Interpreting this month’s results really depends if you are an optimist or a pessimist. Businesses are really looking forward to reopening, and confidence increased markedly on the back of NSW and Victoria’s reopening roadmaps. The rise in confidence suggests they see the roadmaps that have been announced as sufficient to allow activity to really rebound in the coming months.”

            “Still, confidence is more about hope for the future than what is happening in the present. On that front, conditions really deteriorated which shows that lockdowns are taking a toll, despite the resilience the economy has shown through this period.”

            Full release here.

            UK unemployment rate dropped to 3.9%, wage growth solid at 3.4%

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              UK unemployment rate dropped to 3.9% in the three months to January, down from 4.0% and beat expectation of 4.0%. That’s also the lowest level since the period between November 1974 to January 1975. For men, unemployment rate dropped to 4.0%, lowest since 1975. For women, unemployment rate dropped to 3.8%, lowest since 1971.

              Average weekly earnings including bonus rose 3.4% yoy, unchanged from December and beat expectation of 3.2% yoy. Average weekly earnings excluding bonus rose 3.4% yoy, down from December’s 3.5% and matched expectations. Also release, jobless claims rose 27.9k in February, above expectation of 13.1k.

              Full release here.

              RBA projects slower rise in inflation and fall in unemployment

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                Australian Dollar suffers another round of selloff today after RBA revealed rather dovish economic forecasts in the Statement on Monetary Policy. In the summary part, Governor Philip Lowe’s “balanced” turn was echoed.

                The first scenario is “further progress in reducing unemployment and bringing inflation into the target range can reasonably be expected.” In this case, higher interest rate “would become appropriate at some point”. However, in other scenarios, “If there were then to be a sustained increase in unemployment and a lack of progress in returning inflation to target, it might instead be appropriate to lower the cash rate.”

                RBA now judges ” the probabilities of these two sets of scenarios have shifted to be more evenly balanced than previously.”

                In the new economic projections:

                • 2019 year-end growth was revised to 3%, down from 3.25%.
                • 2020 year-end growth was revised to 2.75%, down from 3%.
                • June 2020 unemployment rate was revised to 5%, up from 4.75%.
                • That is, unemployment rate will fall at a slower pace.
                • 2019 year-end CPI was revised to 1.75%, down from 2.25%.
                • 2020 year-end CPI was unchanged at 2.25%.
                • That is, CPI will rise at a slower pace.

                Full SOMP here.

                SOMP Summary.

                Economic projections.

                US Empire state manufacturing fell to -31.3, second largest monthly plunge on record

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                  US Empire State manufacturing index plunged sharply from 11.1 to -31.3 in August, well below expectation of 5.1. The -42 pts decline was the second largest monthly fall on record. 12% of respondents reported conditions had improved while 55% reported worsened condition.

                  Expectations for six months ahead, on the other hand, rose from -6.2 to 2.1. The reading suggests that firms were not optimism about the six-month outlook.

                  Full release here.

                  ECB press conference live stream

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                    BoJ stands pat, raises growth forecasts, lower inflation projections

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                      BoJ left monetary policy unchanged as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. Annual pace of monetary base expansion is held at around JPY 80T, to keep 10-year JGB yields at around zero percent. Harada Yutaka and Kataoka Goushi dissented again in 7-2 vote.

                      In the new economic projections, fiscal 2020 growth forecast was raised from 0.7% to 0.9%. CPI core forecast (ex-sales tax hike) was lowered from 1.0% to 0.9%. For fiscal 2021, growth forecast was raised from 1.0% to 1.1%. CPI core forecast was lowered form 1.5% to 1.4%. BoJ added that risks to economic activity and prices are both “skewed to the downside”. Momentum toward achieving 2% inflation target is “maintained by is not yet sufficiently firm”.

                      BoJ statement, outlook for economic activity and prices.

                      New Zealand BusinessNZ services rose slightly to 55.4, sustained improvement

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                        ActionForex.com
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                        New Zealand BusinessNZ Performance of Services Index ticked up from 55.3 to 55.4 in June, staying above long term average of 53.6 or the survey. Activity/sales dropped from 59.4 to 56.5. But employment improved notably from 49.0 to 53.1. New orders/business rose from 62.0 to 61.7. Stocks/inventories dropped from 54.7 to 54.1. Supplier deliveries rose from 45.6 to 47.8.

                        BNZ Senior Economist Craig Ebert said that “the move to traffic light Orange in mid-April, along with the expedited opening of the border, is clearly providing a basis for sustained improvement in New Zealand’s services sector”.

                        Full release here.

                        Eurozone Sentix investor confidence rose to 29.8, but expectations dropped

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                          ActionForex.com
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                          Eurozone Sentix Investor Confidence rose to 29.8 in July, up from 28.1, but missed expectation of 30.2. Nonetheless, it’s still the 5th increase in a row, and highest since February 2018. Current situation index rose from 21.3 to 29.8, 5th increase in a row, and highest since October 2018. Expectations index, however, dropped from 35.3 to 29.8, lowest since December 2020.

                          Sentix said, “the result is impressive” but, “we are approaching a certain point of maximum momentum in the short term” as expectations dropped. “For the economy as a whole, this is not yet a worrying decline. For the equity markets, on the other hand, which are very much focused on investor expectations, this development could contribute to increased market volatility.”

                          It added, “in this environment, the ECB remains in focus. So far, there is no sign of a turn away from the expansive monetary policy. However, the inflation barometer, which remains clearly in negative territory at -38.25, underscores the danger of further rising inflation rates in a globally increasingly synchronised, strong economic upswing.”

                          Full release here.

                          Eurozone Sentix Investor Confidence rose to -8.7, negative momentum weakening

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                            Eurozone Sentix Investor Confidence increased from -11.1 to -8.7 in April, surpassing the expected -14.0. The Current Situation index experienced its sixth consecutive rise, moving from -9.3 to -4.3, reaching its highest level since March 2022. The Expectations index, however, remained unchanged at -13.0.

                            Sentix commented on the data, stating, “There is no doubt that the Eurozone economy has come through the winter months better than many feared in the autumn.” However, when considering the future, investors are less optimistic, citing “still considerable uncertainty about the further course of the Ukraine war, concerns about a lasting burden on the energy-intensive industrial sector, and – new – question marks about the state of the US economy.”

                            Despite these concerns, the Sentix Theme Barometer indicates that negative expectations regarding inflation and central bank policy have noticeably decreased. While not an all-clear signal, the negative momentum seems to be weakening.

                            Full Eurozone Sentix release here.

                            NZIER downgrades NZ GDP forecasts, upgrades inflation

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                              In the new Consensus Forecasts of NZIER, growth projections for the forecast horizon were revised down while inflation projections were revised up. NZIER noted “increasing headwinds” for the New Zealand economy, including “continued global supply chain disruptions as countries continue to grapple with COVID-19, the war in Ukraine and rising interest rates.” The highest inflation outlook reflects “expectations that high inflation will remain persistent”.

                              In June survey (comparing to March survey):

                              • 2022/23 GDP growth at 2.9% (revised down from 3.6%).
                              • 2023/24 GDP growth at 1.9% (down from 2.7%).
                              • 2024/25 GDP growth at 2.1% (down from 2.5%).
                              • 2022/23 CPI at 4.1% (up from 3.5%).
                              • 2023/24 CPI at 2.6% (up from 2.5%).
                              • 2024/25 CPI at 2.4% (up from 2.3%).

                              Full release here.

                              German Scholz: The goal now is to stabilize

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                                German Finance Minister Olaf Scholz said the additional coronavirus relief measures agreed by the ruling coalition could be worth up to EUR 10B. He emphasized, “the goal now is to stabilize the economy”.

                                “The fact that we acted fast and big has resulted in Germany weathering the crisis much better than other,.” Scholz added. He maintained that the economy would reach pre-crisis levels at the end of 2021, early 2022.

                                Eurozone goods expects down -2.7 yoy, imports fell -18.2% yoy

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                                  Eurozone exports of goods to the rest of the world dropped -2.7% yoy to EUR 227.8B in Jul. Imports fell -18.2% yoy to EUR 221.3B. Eurozone recorded EUR 6.5B trade surplus. Intra-Eurozone trade fell -7.9% yoy to EUR 211.8B.

                                  In seasonally adjusted term, exports fell -1.7% mom to EUR 232.6B. Imports rose 0.7% mom to EUR 229.7B. Trade surplus narrowed from EUR 8.6B to EUR 2.9B, smaller than expectation of EUR 13.5B. Intra-Eurozone trade fell slightly from EUR 219.3B to EUR 218.7B.

                                  Full Eurozone trade balance release here.

                                  Australia leading index consistent with below trend growth well into 2023

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                                    ActionForex.com
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                                    Australia Westpac-MI leading index dropped from -0.84% to -0.92% in November. Growth rate was, thus, in negative territory for the fourth consecutive month. The data is consistent with below trend growth well into 2023. Drivers of weakness are the RBA interest rate and commodity prices.

                                    Westpac expects another 25bps rate hike by RBA in February, “give the outlook for wages; inflation and economic growth”. It expects wages and inflation challenges to persist through early months of 2023, requiring “further increase of 25bps in both March and May.

                                    Full release here.

                                    French President Macron: Europe at a histroic moment to maintain multilateral order in Middle East

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                                      Iran’s President Hassan Rouhani talked with French President Emmanuel Macron in a phone call yesterday, as follow up to Trumps’ withdrawal from the nuclear deal. Iranian Students’ News Agency quoted Rouhnai saying that “under the current conditions, Europe has a very limited opportunity to preserve the nuclear deal, and must, as quickly as possible, clarify its position and specify and announce its intentions with regard to its obligations.” Rouhani also added that “despite what Trump thinks, enrichment in Iran has never been for obtaining a nuclear weapon but instead has been for scientific and technical pursuits.”

                                      Separately, Macron said in an interview with Germany’s Deutsche Welle broadcaster yesterday that “We stand today at a historic moment for Europe – Europe is in charge of guaranteeing the multilateral order that we created at the end of World War II and which today is sometimes being shaken.”

                                      UK Johnson pledges no further Brexit delay after another Commons defeat

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                                        UK Prime Minister Boris Johnson suffered his sixth consecutive defeat at the Commons yesterday. His second call for snap election was also rejected as widely expected. The Commons is now suspended for five weeks.

                                        At the same time, Johnson pledged after the vote that “this government will press on with negotiating a deal, while preparing to leave without one,” referring to Brexit. And, “I will go to that crucial summit in Brussels on Oct. 17, and no matter how many devices this Parliament invents to tie my hands, I will strive to get an agreement in the national interest.”

                                        Johnson also insisted “this government will not delay Brexit any further.” That even the Parliament has passed a law that requires Johnson to seek Brexit delay from October 31 if he couldn’t get a deal.

                                        RBNZ lifts OCR by 50bps to 2.5%, maintains approach of brisk rate hikes

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                                          RBNZ raised Official Cash Rate by 50bps to 2.50% as widely expected. The central bank also indicated that it will follow the projected path to raise interest to nearing 3.5% by the end of 2022, and then around 4% in mid-2023.

                                          “The Committee is comfortable that the projected path of the OCR outlined in the recent May Monetary Policy Statement remains broadly consistent with achieving its primary inflation and employment objectives – without causing unnecessary instability in output, interest rates and the exchange rate,” RBNZ said in the statement.

                                          Also, as noted in the summary records of meeting, “The Committee agreed to maintain its approach of briskly lifting the OCR until it is confident that monetary conditions are sufficient to constrain inflation expectations and bring consumer price inflation to within the target range.”

                                          Full statement here.

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