Eurozone PPI down -0.9% mom, -8.6% yoy in Jan

    Eurozone PPI fell -0.9% mom, -8.6% yoy in January, below expectation of -0.1% mom, -0.8% yoy. For the month, PPI decreased by -0.2% for intermediate goods,  -2.9% for energy, -0.2% for durable consumer goods, increased by 0.6% for capital goods and  by 0.3% for non-durable consumer goods.

    EU PPI fell -0.9% mom, -8.4% yoy. Among Member States for which data are available, the largest monthly decreases in industrial producer prices were recorded in Slovakia (-14.3%), Poland (-3.0%) and Austria (-2.2%). The highest increases were observed in Estonia (+5.3%), Ireland (+4.0%) and Czechia (+2.4%).

    Eurozone PPI release here.

    UK PMI services finalized at 53.8, rising inflationary pressures

      UK PMI Services was finalized at 53.8 in February, down from January’s 54.3. PMI Composite was finalized at 53.0, up fractionally from January’s 52.9.

      Tim Moore, Economics Director at S&P Global Market Intelligence, highlighted the trend as evidence that UK economy may be emerging from the shadows of a technical recession experienced in the latter half of 2023, suggesting a “turning of the corner” towards recovery.

      Meanwhile, the service sector faces rising input costs, primarily driven by higher salary payments and increased shipping expenses. This led to the most significant input price inflation since September 2023.

      Moreover, the pressure to maintain profit margins has prompted service providers to raise their prices at one of the quickest rates since the previous summer, reflecting the necessity to offset the surging staff costs.

      UK PMI services release here.

      Eurozone PMI services finalized at 50.2, two important insights for ECB

        Eurozone PMI Services was finalized at 50.2 in February, up from January’s 48.7, a 7-month high. PMI Composite was finalized at 49.2, up from January’s 47.9, an 8-month high.

        Country-specific data revealed varying degrees of economic activity, with Ireland leading the pack with PMI Composite of 54.4, a 12-month high. Spain and Italy followed closely, posting 9-month highs of 53.9 and 51.1, respectively. However, not all news was positive, as France and Germany trailed behind, with Germany recording a 4-month low of 46.3, and France at 9-month low of 48.1.

        Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted two critical insights from the PMI survey in the context of the upcoming ECB meeting on March 7.

        Firstly, output prices in the service sector continue to “surge at an accelerated rate”, driven by “escalating wages”, underscores inflationary pressures that are yet to abate.

        Secondly, the service sector’s “unexpectedly robust pricing power”, amidst a slow economic recovery and a forecasted growth rate below 1% for 2024, suggests the risk of “a wage-price spiral and stagflation” scenario, exacerbated by structural labor shortages impacting productivity.

        “Those advocating late rate cuts may very well find reinforcement in the PMI findings,” de la Rubia noted.

        Eurozone PMI services release here.

        China’s Caixin PMI services falls to 52.5, composite unchanged at 52.5

          China’s Caixin PMI Services fell from 52.7 to 52.5 in February, below expectation of 52.9. PMI Composite was unchanged at 52.5.

          Wang Zhe, Senior Economist at Caixin Insight Group, noted that both manufacturing and services sectors recorded steady growth. However, he noted supply was “still running ahead” of improved demand. Employment across both sectors saw contraction. On the pricing front, pressures of low prices becoming more pronounced within the manufacturing sector.

          Overall, “market sentiment remained optimistic”, Wang noted.

          Full China Caixin PMI services release here.

          Japan’s Tokyo CPI core rises to 2.5% yoy, PMI services finalized at 52.9

            Japan’s Tokyo CPI core (ex-fresh food) rose from upwardly 1.8% yoy to 2.5% yoy in February, matched expectations. CPI core-core (ex-food and energy) slowed from 3.3% yoy to 3.1% yoy. Headline CPI in the capital city rose from 1.8% yoy to 2.6% yoy.

            Also released, PMI Services was finalized at 52.9 in February, down from January’s 53.1, but stays in expansion for the 18th month in a row. PMI Composite was finalized at 50.6, down from prior month’s 51.5.

            According to Usamah Bhatti, Economist at S&P Global Market Intelligence,services business activity growth was sustained into February while the rate of growth in new business accelerated to a six-month high. However, steeper reduction in manufacturing output levels contributed to a slowdown in overall private sector activity growth.

            Full Japan PMI services release here.

            Fed’s Bostic: No sequential rate cuts and highlights risks of pent-up exuberance

              Atlanta Fed President Raphael Bostic emphasized the necessity of seeing “more progress” on inflation reduction before considering any rate cuts. He said overnight that the prosperity in the labor market and the economy, granting the FOMC the “luxury of making policy without the pressure of urgency.”

              In terms of the pace of policy loosening once initiated, Bostic envisages a measured approach rather than “back to back” adjustments. The reaction of market participants, business leaders, and households to policy changes will critically influence the pace of rate cuts.

              Highlighting ongoing inflation concerns, Bostic pointed out the continued price increases in a significant portion of goods and services at rates exceeding 5% annually. Moreover, a Dallas Fed measure indicated that underlying inflation remains slightly above Fed’s target at 2.6%, further complicating the path towards rate normalization.

              Bostic also reflected on the feedback from business executives, noting a widespread strategy of holding back investments and hiring until more favorable conditions emerge. He warned of the “pent-up exuberance” that could result from a large-scale unleashing of this dormant capacity, introducing a new variable of upside risk to the economy.

              Eurozone Sentix rises to -10.5, but no classic spring revival

                Eurozone Sentix Investor Confidence March climbed from -12.9 to -10.5 in March, slightly surpassing expectations of -10.8. This increment marks the fifth consecutive rise, achieving its highest level since April 2023. Current Situation Index also saw an increase for the fifth month, moving from -20.0 to -18.5, its highest since June 2023. Furthermore, Expectations Index had its sixth month of growth, advancing from -5.5 to -2.3, reaching its peak since February 2022, which predates the onset of the war in Ukraine.

                Contrastingly, Germany, Eurozone’s largest economy, displayed a divergent trend, with Investor Confidence declining for the third consecutive month to -27.9 from -27.1. Current Situation fell for the 3rd straight month from -39.3 to -40.5, lowest reading since July 2020. Expectations Index fell from -14.0 to -14.3.

                Sentix analysts interpreted the overall Eurozone data as moving “in the right direction,” though they cautioned against interpreting this as a sign of a “classic spring revival.” This cautious stance is attributed to “changed interest rate landscape”. Investors are expecting a more expansive monetary policy by ECB ahead.

                Full Eurozone Sentix release here.

                Swiss CPI rises 0.6% mom in Feb, slows to 1.2% yoy

                  Swiss CPI rose 0.6% mom in February, above expectation of 0.5% mom. CPI core (excluding fresh and seasonal products, energy and fuel) rose 0.7% mom. Domestic products prices rose 0.5% mom while imported products prices rose 1.0% mom.

                  For the year, CPI slowed from 1.3% yoy to 1.2% yoy, above expectation of 1.1% yoy. CPI core slowed from 1.2% yoy to 1.1% yoy. Domestic product prices growth slowed from 2.0% yoy to 1.9% yoy. Imported products prices growth improved from -0.9% yoy to -1.0% yoy.

                  Full Swiss CPI release here.

                  Japan’s capital expenditure surges 16.4% in Q4, signaling strong business investment momentum

                    Japan’s capital expenditure surged remarkably by of 16.4% yoy in Q4, significantly outperforming expectations of 2.9% yoy increase. This marked the eleventh consecutive quarter of business investment growth, highlighting the robust confidence among Japanese corporations in the country’s economic prospects.

                    The impressive figures come as a beacon of optimism, especially considering they will contribute to the revision of Q4’s GDP data, which initially indicated unexpected contraction of -0.4% qoq. With this revision, it’s anticipated that Japan may have narrowly avoided slipping into a technical recession.

                    The investment growth was particularly pronounced among manufacturers, who increased their spending by 20.6% yoy. This 11th consecutive quarter of expansion was predominantly driven by the information and communication machinery and transport equipment sectors.

                    Non-manufacturers also contributed with 14.2% yoy increase in investment, marking the sixth consecutive quarter of growth. The telecommunication, transportation, and postal service sectors were notably instrumental in this rise.

                    A Finance Ministry official commented on the data, stating, “The results reflect our view that the economy is recovering moderately. But we will need to monitor the impact of slowing overseas economies and inflation on corporate activity.”

                     

                    Gold may lose momentum above 2100 despite strong rally

                      Gold accelerated sharply higher last week, propelled in part by the significant decline in US treasury yields on Friday. Technically, the key question now is whether the bounce from 1972.86 signifies the commencement of long-term uptrend resumption, or merely constitutes the second leg of the medium term corrective pattern from 2134.97.

                      For now, favor is mildly on the latter case. Hence, while further rally is likely through 100% projection of 1972.86 to 2088.24 from 1984.05 at 2099.43, Gold should start to lose upside momentum above there, and top below 2134.97.

                      Nevertheless, further upside acceleration above 2099.43, or around 2100 in short, would argue that Gold is already ready to resume the long term up trend.

                      OPEC+ extends production cuts, more upside in WTI in near term

                        OPEC+ members announced on Sunday their agreement to extend voluntary oil output cuts of 2.2m barrels per day into Q2, aiming to stabilize the market and support oil prices. Saudi Arabia, the de facto leader of the oil cartel, committed to prolonging its substantial voluntary cut of 1m bpd through the end of June, effectively maintaining its production levels around 9m bpd. Additionally, Russia announced it would reduce its oil production and exports by an extra 471k bpd Q2.

                        Technically speaking, WTI’s rise from 67.79 is still seen as a corrective bounce for now. Further rally is expected as long as 78.07 support holds, to 100% projection of 67.79 to 79.15 from 71.32 at 82.68. However, strong resistance could emerge below 61.8% retracement of 95.50 to 67.79 at 84.91 to limit upside and bring reversal.

                        US ISM manufacturing falls to 47.8, 16th month of contraction

                          US ISM Manufacturing PMI fell from 49.1 to 47.8 in February, below expectation of 49.5. Manufacturing sector continued to contract for the 16th month.

                          Looking at some details, new orders fell from 52.5 to 49.2. Production fell from 50.4 to 48.4. Employment fell from 47.1 to 45.9. Prices fell from 52.9 to 52.5.

                          ISM said: “The past relationship between the Manufacturing PMI and the overall economy indicates that the February reading (47.8 percent) corresponds to a change of plus-1.5 percent in real gross domestic product (GDP) on an annualized basis.”

                          Full US ISM manufacturing release here.

                          BoE’s Pill: Interest rate cuts “some way off” pending inflation evidence

                            BoE Chief Economist Huw Pill suggested in a speech that interest rate cut is still “some way off” in his baseline scenario.

                            He emphasized the need for more “compelling evidence” that the persistent component of UK CPI inflation is is being “squeezed down” towards rates that align with 2% inflation target on a lasting and sustainable basis.

                            “It is that view that led me to vote to keep Bank Rate unchanged in February,” he added.

                            Full speech of BoE Pill here.

                            Fed’s Barkin cautious on rate cuts amid lingering inflation pressures

                              Richmond Fed President Thomas Barkin expressed a cautious stance on the prospect of Fed starting to cut interest rates in the near future, citing ongoing inflation pressures as a primary concern.

                              In an interview with CNBC, Barkin emphasized the need for inflation to normalize before considering adjustments to the interest rate policy. “I’m still hopeful inflation is going to come down and if inflation normalizes then it makes the case for why you want to normalize rates, but to me it starts with inflation,” Barkin stated

                              Barkin highlighted continued wage and inflation pressures, referencing a recent report indicating high inflation levels. While he noted some stabilization in goods inflation, Barkin pointed out that inflation in the services sector remains a challenge.

                              “I still see wage pressures, I still see inflation pressures…we just had a high inflation report yesterday… On the goods side inflation is settling. On the services side, not so much,” he elaborated.

                              Eurozone CPI slows to 2.6%, core down to 3.1%, both above expectations

                                Eurozone CPI slowed from 2.8% yoy to 2.6% yoy in February, above expectation of 2.5% yoy. CPI core (ex-energy, food, alcohol & tobacco) slowed from 3.3% yoy to 3.1% yoy, above expectation of 2.9% yoy.

                                Breaking down the main components, food, alcohol & tobacco is expected to have the highest annual rate in February (4.0%, compared with 5.6% in January), followed by services (3.9%, compared with 4.0% in January), non-energy industrial goods (1.6%, compared with 2.0% in January) and energy (-3.7%, compared with -6.1% in January).

                                Full Eurozone CPI release here.

                                UK PMI manufacturing finalized at 47.5, impacts of Red Sea crisis continue

                                  UK PMI Manufacturing was finalized at 47.5 in February, up from January’s 47.0. This marks the highest reading since April 2023, yet the sector has been contracting for 19 consecutive months.

                                  Rob Dobson, Director at S&P Global Market Intelligence, said the impact of the Red Sea crisis was particularly pronounced, causing delays in raw material deliveries, inflating purchase prices, and impairing production capabilities. This crisis also had a knock-on effect on demand, with new export orders suffering due to supply chain disruptions and escalated shipping costs.

                                  The crisis has exerted considerable pressure on both prices and supplies. Input cost inflation reached an 11-month high, necessitating further increases in selling prices, while average supplier lead times extended to the greatest extent since mid-2022.

                                  Dobson suggests that this inflationary pressure may prompt policymakers to reconsider the timing of anticipated interest rate cuts, hinting at the broader economic implications of the manufacturing sector’s current challenges.

                                  Full UK PMI manufacturing release here.

                                  Eurozone PMI manufacturing finalized at 46.5, one-year industrial recession not ending yet

                                    Eurozone PMI Manufacturing was finalized at 46.5 in February, down slightly from January’s 46.6.

                                    Greece, Ireland, and Spain notably marked significant highs in their manufacturing PMI, with Greece reaching a 24-month high at 55.7, Ireland a 20-month high at 52.2, and Spain entering growth territory with a 20-month high at 51.5.

                                    These figures contrast starkly with the larger economies within such as Germany and France, where manufacturing activity continued to contract, with Germany hitting a 4-month low at 42.5, and France at 11-month high at 47.1.

                                    Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated the Eurozone’s “industrial recession” extends beyond a year without signs of abating. The continued decline in output, particularly in the region’s economic powerhouses Germany and France, underscores the persistent challenges facing the manufacturing sector.

                                    Despite the overall contraction, there’s a “glimmer of hope” as the pace of decline in new orders across Eurozone has softened. This slight improvement suggests that demand conditions could be stabilizing, potentially laying the groundwork for a gradual recovery in the manufacturing sector.

                                    Full Eurozone PMI Manufacturing release here.

                                    China’s NBS PMI manufacturing falls slightly to 49.1, Caixin manufacturing rises to 50.9

                                      China’s manufacturing sector continued its contraction for the fifth consecutive month in February, with official NBS PMI decreasing slightly from 49.2 to 49.1, matched expectations.

                                      New orders subindex remained steady at 49, indicating stagnant demand. New export orders fell further from 47.2 to 46.3, reflecting ongoing pressures on the export front.

                                      NBS PMI Non-Manufacturing rose from 50.7 to 51.4 , surpassing the anticipated 50.8. PMI Composite remained unchanged at 50.9.

                                      In parallel, Caixin PMI Manufacturing, which focuses more on small and medium-sized enterprises, edged up from 50.8 to 50.9 , slightly above expectations of 50.7.

                                      Caixin noted sustained increase in output and new orders, with firms expressing improved business optimism for the second consecutive month. Additionally, input cost inflation declined to a seven-month low, while selling prices fell.

                                      Full China Caixin PMI manufacturing release here.

                                      RBNZ’s Orr: Restrictive policy to stay, expects normalization next year

                                        RBNZ Governor Adrian Orr affirmed today that the economy is “evolving as anticipated”, with inflation expectations declined. However, he reiterated inflation “is still too high”.

                                        The governor emphasized the necessity of maintaining a restrictive monetary policy stance “for some time.” He added that he expects to “begin normalizing policy in 2025.”

                                         

                                        Japan’s PMI manufacturing finalized at 47.2, worst since Aug 2020

                                          Japan’s PMI Manufacturing was finalized at 47.2 in February, down from January’s 48.0. This marks the ninth consecutive month of contraction, presenting the most significant downturn since August 2020.

                                          According to S&P Global, the decline was characterized by sharper falls in both output and new orders. Additionally, the sector experienced the most substantial decline in employment seen in over three years, indicating that the downturn is having a tangible impact on workforce. Furthermore, rate of increase in output prices slowed to the lowest level since June 2011, suggesting that price pressures are easing amid weakened demand.

                                          Full Japan PMI manufacturing release here.