Germany PMI manufacturing finalized at 58.4, false impression distorted by delivery times

    Germany PMI Manufacturing was finalized at 58.4 in September, down from August’s 62.6. Markit said output and new orders rose at slowest rate in 15 months. Input shortages continued to push up costs, leading to higher output prices. Pace of job creation slowed as growth expectations dipped to 13-month low.

    Phil Smith, Associate Economics Director at IHS Markit, said:

    “At 58.4, the latest headline PMI reading gives a false impression as to the manufacturing sector’s current performance, with the suppliers’ delivery times component continuing to distort the picture. Trends in output and new orders are weaker than the headline number suggests.

    “The unprecedented supply shortages we’ve seen in recent months have been holding back production levels for some time now, and we’re increasingly seeing this disruption feed back up the supply chain and resulting in reduced demand for intermediate goods as orders are either postponed or cancelled. As a result, overall growth in new orders dropped to a 15-month low in September.

    “At the same time, supply bottlenecks continue to drive up input costs and, in turn, put pressure on manufacturers to raise prices, which is acting as another headwind to growth. The rate of input price inflation looks like it might have peaked but is still running close to the fastest in the survey’s history, leading to near-record numbers of goods producers raising prices.

    “Manufacturers’ optimism towards the outlook is steadily ebbing away, down in September to its lowest for 13 months, with many firms concerned that supply shortages will persist into next year.”

    Full release here.

    France PMI manufacturing finalized at 55, intense supply-side imbalances even affecting the demand-side

      France PMI Manufacturing was finalized at 55.0 in September, down from August’s 57.5, lowest since January. Markit said that input lead times deteriorated at unprecedented rate prior to COVID-19. Output growth lost further momentum amid supply-side challenges. New order growth softened further.

      Joe Hayes, Senior Economist at IHS Markit, said: “September survey data show us that the intense supply-side imbalances are now starting to seriously impede the French manufacturing sector and are even affecting the demand-side of the economy too.

      “Lead times are rising at extreme rates, and port closures in Asia seen recently have added fuel to the fire…. Surveyed firms mentioned that clients are becoming hesitant and orders are being postponed or not placed at all , so we’re now seeing a negative demand-side impact.

      Full release here.

      Australia AiG manufacturing dropped to 51.2, recovery all-but-stalled

        Australia AiG Performance of Manufacturing Index dropped from 51.6 to 51.2 in September. Looking at some details, production rose 2.9 to 53.1. Employment dropped from -4.3 to 47.1. New orders dropped -5.1 to 52.0. Exports rose 6.8 to 51.9.

        Ai Group Chief Executive Innes Willox said: “The recovery in the manufacturing sector over the past year all-but-stalled in September as the impacts of lockdowns and border closures constrained activity in the two largest states…. Manufacturers are hoping that the prospect of restrictions being wound back will see a strong lift in performance over coming months.”

        Full release here.

        Japan PMI manufacturing finalized at 51.5, enewed reductions in production and incoming business

          Japan PMI Manufacturing was finalized at 51.5 in September, down from August’s 52.7. Markit noted renewed reductions in production and incoming business. Cost burdens has the sharpest rise in 13 years amid supply chain disruption. Businesses confidence, however, strengthened for the first time in three months.

          Usamah Bhatti, Economist at IHS Markit, said:

          “September data indicated a softer improvement in the health of the Japanese manufacturing sector, as the latest Manufacturing PMI signalled that firms began to feel the impacts of the resurgence in COVID-19 cases related to the Delta variant and ongoing supply chain disruption.

          “Japanese firms recorded renewed declines in both output and new orders, as businesses succumbed to disruption caused by strict pandemic restrictions and raw material shortages. Positively, external markets reversed the decline seen in August to return to expansion territory, although the rate of growth was only mild.

          “Supply chain disruption continued to dampen activity and demand during September. Firms noted a sharp deterioration in vendor performance as supplier delivery times lengthened to the greatest extent since April 2011.

          “Yet, Japanese goods producers were confident that these challenges would lift in the near term and noted stronger optimism regarding the year ahead outlook. Confidence was underpinned by hopes that the end of the pandemic would trigger a broad recovery in demand, and encourage a number of new product launches. IHS Markit estimates that industrial production will rise by 8.2% in 2021, though this will not fully recover the output lost to the pandemic last year.”

          Full release here.

          Japan Tankan large manufacturing index rose to 18, highest since 2018

            Japan’s Tankan large manufacturing index rose from 14 to 18 in Q3, above expectation of 13. That’s the highest level since 2018. Large manufacturing outlook rose from 13 to 14, below expectation of 15. Non-manufacturing index rose from 1 to 2, above expectation of 0. Non-manufacturing outlook was unchanged at 3, below expectation of 5.

            Large companies expected to expand capital investment by 10.1% in the fiscal year started April, risen from prior indication of 9.6%. Inflation is expected to be 0.7% a year from now, slightly higher than 0.6% as expected in prior survey.

            Full release here.

            BoJ opinions: No significant change in the situation in Japan

              In the Summary of Opinions of BoJ’s September 21-22 meeting, it’s noted, “since there is no significant change in the situation in Japan where economic activity, such as of firms, has been supported by accommodative financial conditions, it is appropriate for the Bank to maintain the current monetary policy measures”.

              One opinion also noted, “although financial markets have been stable on the whole, it is necessary to be vigilant in closely monitoring economic and financial developments, including the impact of developments in the Chinese real estate sector on global financial markets, and be ready to respond promptly if necessary.”

              Full Summary of Opinions here.

              US Q2 GDP growth finalized at 6.7% annualized

                US Q2 GDP growth was finalized at 6.7% annualized, revised up from 6.6%. Upward revisions to personal consumption expenditures (PCE), exports, and private inventory investment were partly offset by an upward revision to imports, which are a subtraction in the calculation of GDP.

                Full release here.

                US initial jobless claims rose to 362k, above expectation

                  US initial jobless claims rose 11k to 362k in the week ending September 25, above expectation of 321k. Four-week moving average of initial claims rose 4k to 340k.

                  Continuing claims dropped -18k to 2802 in the week ending September 18. Four-week moving average of continuing claims dropped -750 to 2797k, lowest since March 21, 2020.

                  Full release here.

                  Eurozone unemployment rate dropped to 7.5% in Aug, EU dropped to 6.8%

                    Eurozone unemployment rate dropped from 7.6% to 7.5% in August, versus expectation of 7.6%. EU unemployment rate dropped from 6.9% to 6.8%.

                    Eurostat estimates that 14.469 million men and women in the EU, of whom 12.162 million in the euro area, were unemployed in August 2021. Compared with July 2021, the number of persons unemployed decreased by 224 000 in the EU and by 261 000 in the euro area.

                    Full release here.

                     

                    Silver’s down trend continues, targeting 20.92 projection level

                      Silver’s down trend resumes this week and hits as low as 21.41 so far. The larger down trend from 30.07 is in progress for 61.8% projection of 28.73 to 22.36 from 24.86 at 20.92 next. Also prior rejection both 55 day and 55 week EMA affirmed near term and medium term bearishness. Firm break of 20.92 will target 61.8% retracement of 11.67 to 30.07 at 18.69 before completing the current down trend.

                      Meanwhile, break of 23.13 resistance is needed to be the first sign of short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

                      BoJ Kuroda: Timing and pace of recovery in consumption remains highly uncertain

                        BoJ Governor Haruhiko Kuroda reiterated in a speech that “consumption is expected to pick up if further progress in vaccinations allow society to curb infections, while resuming economic activity.”

                        “But the timing and pace of recovery in consumption remains highly uncertain and could change depending on how the pandemic unfolds,” he added.

                        “We will scrutinise the impact of the pandemic on the economy and take additional easing steps without hesitation if needed,” he pledged again.

                        Swiss KOF dropped to 110.6 in Sep, slowdown likely to continue in coming months

                          Swiss KOF Economic Barometer dropped from 113.5 to 110.6 in September, slightly above expectation of 110.3. That’s the fourth decline in a row. The index remains above its long-term average, but the slowing in recovery is “likely to continue in the coming months”.

                          KOF also said: “The recurring decline is primarily attributable to bundles of indicators concerning foreign demand. Indicators of the manufacturing sector send an additional negative signal, followed by indicators of the economic sector other services. By contrast, indicators from the finance and insurance sector are providing slightly positive impulses.”

                          Full release here.

                          UK Q2 GDP growth finalized at 5.5% qoq, still -3.3% below pre-pandemic level

                            UK Q2 GDP growth was finalized at 5.5% qoq, revised up from 4.8% qoq. GDP remained -3.3% below the pre-pandemic level at Q4 2019.

                            In output terms, the largest contributors to this increase were from wholesale and retail trade, accommodation and food service activities, education and human health, and social work activities.

                            There were increases in all main components of expenditure, with the largest contribution from household consumption.

                            Full release here.

                            China Caixin PMI manufacturing rose to 50, pandemic impacts demand, supply and circulation

                              China Caixin PMI Manufacturing rose from 49.2 to 50.0 in September, above expectation of 49.6. Caixin said new orders returned to growth. Output fell at softer pace. Inflation pressures picked up amid material shortages.

                              Wang Zhe, Senior Economist at Caixin Insight Group said: “On the one hand, the epidemic continued to impact demand, supply, and circulation in the manufacturing sector. The state of the epidemic overseas and the shortage of shipping capacity also dragged down total demand. Epidemic control measures have clearly impacted the logistics industry.”

                              Also released, the official NBS PMI Manufacturing dropped from 50.1 to 49.6 in September, versus expectation of 50.2. PMI Non-Manufacturing rose from 47.5 to 53.2, above expectation of 50.8.

                              Japan industrial production dropped -3.2% mom in Aug, auto production shrank

                                Japan industrial production dropped -3.2% mom in August, worse than expectation of -0.5% mom. Production in auto dropped -15.2% mom as affected by global semiconductor shortage and factory shutdowns in Southeast Asia. Output of electrical machinery and information and communication electronics equipment also dropped -10.6% mom.

                                The Ministry of Economy, Trade and Industry downgraded the assessment of industrial production, and said recovery “has paused. Nevertheless, based on a poll of manufacturers, production is expected to rise 0.2% mom in September and then 6.8% mom in October.

                                Also released, retail sales dropped -3.2% yoy in August, versus expectation of -1.3% yoy. That’s the first decline in six months.

                                New Zealand ANZ business confidence rose to -7.2, activity dropped to 18.2

                                  New Zealand ANZ Business Confidence rose to -7.2 in September, up from August’s -14.5. Own Activity Outlook dropped to 18.2, down from 20.2. Looking at some details, export intentions dropped from 8.4 to 7.4. Investment intentions dropped from 15.4 to 9.2. Cost expectations dropped from 85.0 to 84.2. Employment intentions dropped from 17.9 to 14.1. Inflation expectations ticked down from 3.06% to 3.02%.

                                  ANZ said: “The Auckland COVID outbreak drags on but businesses so far appear to be keeping their eyes on the prize. Spending has already bounced back quite a lot, particularly outside Auckland, and experience has shown momentum tends to recover quickly. In that context, interest rate increases may well prove more of a challenge. The housing market is vulnerable, with headwinds gathering, and there’s no question the housing market and construction more generally have been key drivers of growth over the past 18 months – for what’s definitely been a mix of better and worse.”

                                  Full release here.

                                  Fed Daly: Appropriate to start tapering by later this year

                                    San Francisco Fed President Mary Daly said, “by the end of the year, if things continue as I expect them to with the economy, then I would expect us to hit that ‘substantial further progress’ goal, threshold, by later this year and it would be appropriate to start dialing back” asset purchases.

                                    Daly also noted that Fed has set a different, higher bar for rate hike. “If we should get there in the time frame of next year that would be a tremendous win for the economy,” she said, but “I don’t expect that to be the case.”

                                    ECB Lagarde: Higher energy prices to go out in first part of 22

                                      In an online seminar hosted by ECB yesterday, President Christine Lagarde noted that “how long how those bottlenecks will take to be resolved” is one of the question marks. She expected the impact of higher energy prices to “go out in the first part of ’22”. Also, “the last of the uncertainties that we have to account for…is potential new waves of a pandemic that would be vaccine-resistant.”

                                      BoE Governor Andrew Bailey said, “I expect us to be back to the pre-pandemic level in the early part of next year, possibly a month or two later than we thought we would be at the start of August.”

                                      Some analysts took a message from September MPC minutes that BOE could raise interest rate in November, while the asset purchase program is still in its final stages. Bailey declined to comment directly. But he noted, “the preferred tool will always be rates because we understand the effect of rates in the monetary policy transmission mechanism. But that’s not to pre-judge what we will decide in November,”

                                      BoJ Governor Haruhiko Kuroda maintained said, “whatever fiscal, regulatory or any other policies the new government pursues, the BOJ will continue to maintain extremely accommodative monetary policy in order to achieve its 2% price stability target as soon as possible.”

                                      “In coming years, we must achieve our 2% price stability target. That is true. But at this moment, (achieving) economic recovery and faster growth are the most important challenges faced by us,” Kuroda said.

                                      Fed Harker: It will soon be time to boringly taper

                                        Philadelphia Fed Bank President Patrick Harker said, “I am in the camp that believes it will soon be time to begin slowly and methodically — frankly, boringly — tapering our $120 billion in monthly purchases of Treasury bills and mortgage-backed securities.”

                                        Harker expected the economy to grow by 6.5% this year, and moderate to 3.5% next. He also expects inflation to be around 4% this year, and then slow back to 2% in 2022. “We’re already seeing some moderation there, as prices of used cars finally stabilize,” he added.

                                         

                                        ECB Makhlouf not looking to raise rates or respond to transitory inflation

                                          ECB Governing Council member Gabriel Makhlouf warned in a Bloomberg TV interview, “we must be very vigilant of the risks out there.” He referred to the risk of persistently high inflation sue to supply bottlenecks.

                                          “That’s the risk that we at the ECB need to be very cautious of and very aware of and ready to respond to if it happens,” Makhlouf said. “Right now I don’t think we should be looking to raise rates or respond to transitory inflation.”

                                          The crisis program “was set up for an emergency at the start of the pandemic. As we see the emergency disappear there are logical consequences to that particular program,” Makhlouf said. “On the other hand there’s a long discussion to be had at the ECB, there’s a lot of uncertainty around with what’s happening in economies.”