3/10/20: BRIC: Manufacturing PMIs Q3 2020

 

Based on July-September data, here are the main takeaways from the BRIC Manufacturing Sector PMIs for 3Q 2020:

• Brazil Manufacturing PMIs gained serious speed in 3Q 2020 compared to 2Q 2020, rising from a recessionary reading of 42.0 in April-June to signal rapid recovery at 62.6 over the last three months through September. This marks the highest quarterly reading on record for the country Manufacturing sector. Dynamically, growth accelerated in every month since the start of the sector recovery in June 2020.
• Russia Manufacturing PMI came in at a disappointing and contractionary 49.5 in 3Q 2020, marking the fifth consecutive quarter of sub-50 readings, although still an improvement on the pandemic period low of 39.0 set in 2Q 2020. Adding pressure to the already poor performance, monthly PMI reading slumped from a relatively weak recovery signalled by PMI at 51.1 in August to a recessionary reading of 48.9 in September. 
• India Manufacturing PMI rose from 52.0 in August to 56.8 in September, with 3Q 2020 reading at 51.6 - a substantial but likely incomplete recovery on the pandemic low of 35.1 set in 2Q 2020.
• China Manufacturing PMI rose from 2Q 2020 reading of 50.4 to 3Q 2020 reading of 53.0, implying almost a full recovery in the manufacturing sector on 1Q 2020 pandemic period trough of 47.2. September marked a fifth consecutive month of PMI readings above 50.0. 

Overall, BRIC weighted Manufacturing Activity Index (based on monthly PMIs) stood at 53.0 in 3Q 2020, up on 45.0 in 2Q 2020 and 49.1 in 1Q 2020. Current reading signals the fastest q/q growth in the sector since 1Q 2011. The ongoing recovery across the BRIC economies is faster than Global Manufacturing PMI recovery (at 51.6), albeit highly uneven and somewhat suspicious. The core driver for this growth is Brazil, where manufacturing data dynamics is completely out of touch with services data dynamics and looks extremely unreliable. 

2/10/20: A new mortgage arrears crisis on its way

 

My latest article on Irish banking sector problems with distressed mortgages is out today in The Currency: 

There’s a new mortgage arrears crisis on its way, and official Ireland is not ready for it

The Central Bank of Ireland has started publishing new data on mortgage arrears – and the news is not good. An arrears crisis is brewing. The banks, and the state, are woefully unprepared for it.

https://thecurrency.news/articles/24779/theres-a-new-mortgage-arrears-crisis-on-its-way-and-official-ireland-is-not-ready-for-it/ 

26/9/20: America's Scariest Charts: Duration of Unemployment

 Adding to my prior posts covering:

• Continued unemployment claims: https://trueeconomics.blogspot.com/2020/09/26920-americas-scariest-charts_27.html, and
• Initial unemployment claims and employment: https://trueeconomics.blogspot.com/2020/09/26920-americas-scariest-charts_27.html

Here is analysis of the latest duration of unemployment data, and a look at employment data across past recessions.

As usual with all recessions, average duration of unemployment has fallen in the early days of the pandemic, as new unemployment cases rose dramatically, compared to prior existent claims. Since then, however, average duration has been creeping up. 

As the jobs recovery continues, we will be seeing further increases in the average duration of unemployment as a sign of longer term unemployment, so keep an eye for the future updates to the graph.

At the peak of the pandemic, average duration of unemployment fell to just 6.1 weeks or 15.6 weeks below pre-pandemic average. As of the end of August 2020, average duration of unemployment was at 20.2 weeks, or just 1.54 weeks below the last post-recession period average. 

Taking a slightly different look at the labour markets, consider current employment levels relative to the 6 months pre-COVID19 average levels of employment:

The chart above helps strip out volatility in the levels of employment across the business cycle by using 6 months average levels of employment for the period prior to the onset of the recession as a benchmark and then relating recession period and subsequent recovery period employment levels to this benchmark.

Clearly, current recovery to-date has been sharp, but given the levels of employment contraction in the first months of the pandemic, even this speed of the recovery is not sufficient to bounce employment levels back to where they were during pre-COVID19 period of economic growth. The chart also shows that recovery in employment has slowed down sharply in August, compared to June and July.

26/9/20: America's Scariest Charts: Employment & Initial Unemployment Claims

 

Starting with initial unemployment claims (continued claims are covered in the earlier post: https://trueeconomics.blogspot.com/2020/09/26920-americas-scariest-charts_27.html) through the week ending September 19, 2020, based on non-seasonally adjusted data:

• Initial unemployment claims fell to 796,015 in the week ending September 12 - marking the lowest number of new claims filed in any week since the start of the COVID19 crisis.
• The new claims rose back to 824,542 in the week ending September 19, bringing the numbers of new claims back above 800,000.
• The latest 4 weeks average new unemployment claims stand at 830,890 weekly claims, which is above the highest number reached since the peak of the Global Financial Crisis. 
• Pre-COVID19 period historical high was attained in the week of September 1, 1982 at 1,073,500 new claims filed. The latest reading for September 2020 ranks as the 35th highest in the entire history and 10th highest if COVID19 period data was excluded from the set.
• The latest 3 months cumulative new claims number stands at 13,789,312, down from the COVID19 pandemic peak of 41,865,591. 
• Current cumulative count (3 months) is 4,607,312 above the pre-COVID historical high attained March 1, 1975.
• Since the start of the labour markets recovery, average weekly improvement in the initial claims has been a reduction of 224,453 claims per week. This fell to just 305 claims reductions per week over the last 4 weeks. This is not encouraging.

Chart to illustrate the dynamics:

Now, employment figures, based on the seasonally-adjusted non-farm payrolls through August 2020 (the latest data we have):

As it says in the boxes in the chart: 

• Current reading to pre-crisis high is still down 11,549,000, but we are up on crisis period low by 10,612,00.
• Crisis low employment to pre-crisis high was down 22,160,000, and the running rate of the recovery since the lowest point of employment in COVID19 pandemic has been an addition of 2,653,000 per month on average. With this rate of recovery, it will take the economy 4.4 months to regain pre-COVID19 levels of employment.
• However, last month's rate of jobs recovery was only 1,332,000, which implies employment levels recovery to pre-COVID19 levels of 6.7 months, at this rate of jobs growth.

8/92020: BRIC: Composite economic activity indicators

 Based on Markit's Composite PMIs, here are the BRIC economies composite economic activity indicators for 3Q 2020 to-date (July-August). 

Please, note: Manufacturing PMIs for BRIC economies were covered here: https://trueeconomics.blogspot.com/2020/09/8920-bric-manufacturing-pmis.html, and Services PMIs were covered here: https://trueeconomics.blogspot.com/2020/09/8920-bric-services-pmis.html. 

• Brazil Composite PMI for 3Q 2020 currently sits at 50.6, barely above the zero-growth line of 50.0 in statistical terms. This represents a major improvement in growth momentum compared to an outright depressionary reading of 31.8 in 2Q 2020 and a swing of 18.8 points - a respectable reversal of momentum, although not a signal of an appreciable recovery from the recession.
• Russia Composite PMI for 3Q 2020 is at blistering 57.1, suggesting a genuine recovery, albeit one-sided, driven by services sector rebound. COVID19 pandemic low was recorded in 2Q 2020 at abysmal 32.6, implying latest swing from the trough of massive 24.5 points. This does appear to be consistent with a robust recovery momentum, albeit with some caveats. This is the highest reading for any quarter since 3Q 2006 and the third highest reading on record.
• China Composite PMI is at 54.8 so far through 3Q 2020, an improvement on growth-signalling 52.6 reading in 2Q 2020 and up respectable 12.8 points on recession trough in 1Q 2020.
• India Composite PMI managed to rocket to a still-recessionary 41.6 in 3Q 2020 to-date, up on the recession trough of 19.9 in 2Q 2020 - a swing of 21.7 points. Still, the economy remains in a pronounced recession and 3Q 2020 so far is showing signs of exacerbated contraction building on 2Q 2020 collapse in activity.

For BRIC economies as a whole, the chart next shows GDP-weighted and GDP-shares weighted BRIC Indices of activity, compared to Global Composite PMIs:

Overall, BRIC economies growth momentum is still subdued and largely performing worse than the Global Composite PMI indicator.

8/9/20: BRIC: Services PMIs

Services sector activity as reflected by PMIs from the BRIC economies is now available for August, so here are the top numbers: 

In terms of actual readings, and do recall, quarterly PMIs referenced above are averages over three months period, so 3Q 2020 data is only covering July-August 2020.

• Brazil Services PMI was nowhere near the insane reading posted by the country Manufacturing PMI (see post here: https://trueeconomics.blogspot.com/2020/09/8920-bric-manufacturing-pmis.html). Services index came in at 46.0 for the period of July-August (3Q 2020 to-date), up on disastrously low 30.3 in 2Q 2020, but still well below 50.0 line of zero growth. Reading PMIs, this means that the sector activity continued to contract in 3Q 2020 so far, on top of the already sharp contraction experienced in 1Q 2020 and 2Q 2020.
• Having set no records in Manufacturing, Russia Services PMI came out with a massive and seriously surprising print to the upside in August. As the result, 3Q 2020 to-date Services PMI rose to 58.4 for the highest reading since 2Q 2009. As massive as the print is, it is pretty 'normal' for volatile Russian services data. Still, the recovery it signals is sharp, as 2Q 2020 COVID19 trough was at a misery-inducing 32.0. The implied trough-to-peak swing is jaw-dropping 26.4 points.
• China Services PMI rose in the first two months of 3Q 2020 to 54.1 from already expansionary 52.6 in 2Q 2020. Trough-to-peak COVID19 swing is now at 13.7 points, and the latest reading is the highest since 4Q 2010, when the index stood at 54.2.
• India Services sectors are still in sharp contraction. Recall: in 2Q 2020, India Services PMI crashed, smashed, collapsed, melted down, or whatever else you might call, falling from 54.1 in 1Q 2020 to 17.2 in 2Q 2020, the lowest reading for any BRIC economy in any sector at any time. So far, in 3Q 2020, the index is running at 38.0, which implies that India's services sectors continue to contract from already reduced activity in prior quarter. In the light of this super-sharp recessionary dynamic, it is impossible to reconcile Manufacturing sector PMI and Services sector PMI in this economy.

Overall, BRIC Services Activity Index - a measure I compute using a range of data inputs, including Markit's PMIs - came in 49.9 in 3Q 2020 (to-date), an improvement on 2Q 2020 reading of 40.4 and above 1Q reading of 44.9. Nonetheless, across the four largest EM economies, Services activity continues to contract for the third quarter in a row, nominally, and it is standing still statistically. In this, BRIC economies are distinct from the Global Services PMI indicator, which rose from 35.6 in 2Q 2020 to 51.3 in 3Q 2020 (to-date). 

Stay tuned for BRIC Composite PMIs next.

8/9/20: BRIC: Manufacturing PMIs

Updating BRIC Manufacturing PMIs - with some delay (sorry, start of the academic year):

 These are quarter averages, with July-August for 2020. And wee have:

• A mad print for Brazil. In the last four months, Brazil Manufacturing PMI went from 38.3 in May to 51.6 in June, 58.2 in July and a totally incredible 64.7 in August. As PMIs are indicators of month-on-month activity changes, and not comparable year-on-year, all we know is that there is a massive boom in the sector from the lows of the COVID19 pandemic recession. But we do not know if we are close to pre-COVID19 levels or close to the pre-COVID19 trends or anywhere, specifically. Still, if 64.7 reading in August is a genuine indicator of activity, we are seeing real recovery in the economy. In fact, July and August are now two highest PMI readings months in history of the series. On a quarterly average basis, we are at 61.5 so far for 3Q 2020 which is the highest in history, with the prior historical high registered in 1Q 2010 at 56.3. Current trough-to-peak swing in Manufacturing PMI for Brazil for the COVID19 period is incredible 19.5 points.
• Russia, in contrast, continues to show signs of weaknesses in the Manufacturing sector, with 3Q 2020 PMIs so far running at 49.8 - statistically reflecting zero growth. Notionally, this marks the sixth consecutive quarter of PMIs below 50 in nominal terms and a seventh consecutive quarter at or below 50. Current trough-to-peak swing in Manufacturing PMI for China for the COVID19 period is sharp at 10.8 points, and this before we establish any recovery (over 50.0) momentum.
• China Manufacturing PMI is currently averaging 53.0 for 3Q 2020, the highest reading since 4Q 2010. China posted statistically zero growth - PMI at 50.4 in 2Q 2020, on foot of a significant, but not catastrophic, contraction in 1Q 2020 at 47.2. Current trough-to-peak swing in Manufacturing PMI for China for the COVID19 period is relatively moderate at 5.8 points.
• India Manufacturing PMI for 3Q 2020 is at 49.0, having risen from the recession trough of 35.1 in 2Q 2020, and trough-to-peak swing is at 13.9 points.

Overall, BRIC Manufacturing activity index is at 52.3 as of the first two months of 3Q 2020, up from 45.0 in 2Q 2020 and 49.1 in 1Q 2020. The trend is for a substantial improvement over time, with the trough-to-peak swing currently at 7.3 points.The index is outperforming Global Manufacturing PMI that currently sits at 51.2 for 3Q 2020, up 7.6 points on the trough in 2Q 2020. 

Stay tuned for BRIC Services PMIs and Composite PMIs next.