Soft patch ahead. Global PMI at 4-month low. Broad-based slowdown in emerging markets growth. Currency war.
SOFT PATCH WATCH
U.S. Jobs: All Systems Go?
The February ADP result suggests the U.S. economy is again churning out solid, albeit far from spectacular, job growth. According to this estimate, the private sector added 198,000 positions last month. While better than the 12-month average gain of 152,000, that’s actually below the (revised) gain of 233,000 in the prior three months. Still, it was firm enough a report for us to revise up our call for overall February payrolls to +180,000 (due Friday).
One big hope is construction, and the ADP survey reported an average gain of 27,000 in the past 3 months. On the flip side, manufacturing is struggling to make big gains (averaging just 5k in the past 3 months). Note that factory orders and shipments have seen little to no growth over the past six months. (BMO Capital)
U.S. CAR PRODUCTION SLOWING
According to Ward’s Automotive, industry production in North America is expected to increase 2% year over year (y/y) in Q2/13. Detroit Three production is expected to increase 1% y/y in Q2/13(…) (BMO)
ECB Keeps Rates Unchanged as Italy Turmoil Threatens Recovery The European Central Bank left interest rates on hold as it gauges how big a threat Italy poses to the economic recovery.
French fourth-quarter unemployment at highest since 1999
(…) French fourth-quarter unemployment hit its highest level since 1999, reaching 10.6 per cent. (…)
Orders, adjusted for seasonal swings and inflation, decreased 1.9 from December, when they rose a revised 1.1 percent, the Economy Ministry in Berlin said today. In the year, workday- adjusted orders dropped 2.5 percent. (…)
Factory orders from the euro area slumped 4.1 percent in January, driving a 3 percent decline in export demand, today’s report shows. Domestic sales dropped 0.6 percent. Orders for intermediate, investment and consumer goods all fell. December orders were revised up from an initially reported 0.8 percent increase.
Germany exports about 40 percent of its products to the euro area.
Strength of first quarter growth under scrutiny as global PMI hits four-month low
Global economic growth slowed to a four-month low in February, according to the JPMorgan Global PMI, a survey-based leading indicator of worldwide business activity produced by Markit. The index remains elevated compared to the lows seen late last year, suggesting that global GDP growth is still likely to have picked up in the first quarter (the annual rate of growth of worldwide GDP slowed to an estimated three-year low of 1.3% in the final quarter of 2012), but the drop in the PMI from 53.2 in January to 53.0 in February raises question marks over growth momentum and the sustainability of the improvement moving into the second quarter.
Business activity growth slowed in both manufacturing and services, though in both cases remains much improved on the lows seen late last year.
Some encouragement came from firms also reporting that inflows of new business grew at the fastest rate for 11 months, and that companies continued to take on new staff at a rate unchanged on that seen in January, suggesting that overall business activity growth may pick up again in March.
Among developed economies, the US continued to lead the pack in February, contrasting with only very modest growth in the UK, near-stagnation in Japan and ongoing contraction in the Eurozone.
Broad-based slowdown in emerging markets growth in February
The HSBC Emerging Markets Index (EMI), a monthly indicator derived from the PMI™ surveys, fell from 53.8 in January to 52.3 in February. That was the lowest figure since August 2012 and indicated a moderation in economic growth in global emerging markets.
Data broken down by broad sector showed that the slowdown in the pace of expansion was broad-based across service providers and manufacturers. Goods production rose at the slowest rate since November, while services activity growth eased to a six-month low.
Among the largest economies covered, growth rates slowed in China, India and Brazil in February. Moreover, softer increases in output were evident in both the manufacturing and services sectors of these
countries (except for India, were goods production growth accelerated).
New business growth in emerging markets slowed to a six-month low in February, and was also weaker than the trend shown over the course of 2012. All four BRIC economies registered slower increases in new business since January. Meanwhile, employment rose at the weakest rate in three months.
(…) In unusually strong language, Gao Xiqing, president of China Investment Corp., echoed alarms from Latin America to Europe that the new Japanese government is aiming to boost its exports at other countries’ expense via a weaker currency—allegations often leveled at China itself by the U.S. and others.
Mr. Gao’s comments in an interview with The Wall Street Journal, among the strongest remarks yet by a senior Chinese official, signaled growing concern in Beijing about the impact on the Chinese economy of a wave of more-aggressive easing under Japanese Prime Minister Shinzo Abe, which the country says is aimed at ending persistent deflation. (…)
“Treating the neighbors as your garbage bin and starting a currency war would not only be dangerous for others but eventually be bad for yourself,” he said in the interview, at the annual National People’s Congress in Beijing. “I would hope that [Japan] doesn’t do that as a responsible government,” he said. (…)