1/10/18: BRIC Manufacturing PMI dips down in 3Q 2018

BRIC Manufacturing PMIs turned south in 3Q 2018 in line with Global trend, but leading that trend to the downside. Per latest data through September 2018:

Russia Manufacturing PMI averaged miserly 49.0 in 3Q 2018, down from anaemic 50.2 in 2Q 2018. This was the lowest quarterly reading since 3Q 2015 when the Russian economy was in an official recession. Russia is the only BRIC economy nominally in contraction territory, when it comes to PMIs-signalled manufacturing sector activity, and 49.0 is statistically close to being sub-50 reading as well.

Brazil’s Manufacturing PMI remained broadly unchanged on 2Q 2018 reading of 50.9 at 50.8 in 3Q 2018. Although notionally above 50.0 mark, statistically, the reading was not significantly different from zero growth signal of 50.0. This means that both Russian and Brazilian economies registered deteriorating PMIs over two consecutive quarters in the case of Brazil and 4 quarters in the case of Russia.

China Manufacturing PMI was at disappointing 50.5 in 3Q 2018, down from a weak 51.1 reading in 2Q 2018. This marks the worst reading in China PMI in five quarters. As with Brazil, China’s Manufacturing PMI for 3Q 2018 was not statistically distinct from 50.0.

India Manufacturing PMI was the only one that remained statistically in expansion territory at 52.1 in 3Q 2018, basically unchanged on 52.0 in 2Q 2018 and barely up on 51.8 in 1Q 2018.

Meanwhile, Global Manufacturing PMI averaged 52.5 in 3Q 2018, down from 53.2 in 2Q 2018 and 54.0 in 4Q 2017 and 1Q 2017. All in, Global PMI has finished 3Q 2018 at the lowest level in 8 consecutive quarters.

3/8/17: BRIC Manufacturing PMIs: July

BRIC PMIs for July 2017 are out, so here are the headline numbers and some analysis. 

Top level summary of monthly readings for BRIC Manufacturing PMIs is provided in the Table below:

Of interest here are:

• Changes in Brazil Manufacturing PMI signalled weakening in the economy in June that was sustained into July. Manufacturing PMI for Brazil has now fallen from 52.0 in May to 50.5 in June and to 50.0 in July. This suggests that any recovery momentum was short lived. 
• Russian Manufacturing PMI, meanwhile, powered up to 52.7 in July from 50.3 in June, rising to the highest level in 6 months. Good news: Russian manufacturing sector has now posted above-50 nominal readings in 12 consecutive months. Less bright news: Russian Manufacturing PMIs have signalled weak rate of recovery in 5 months to July and July reading was not quite as impressive as for the period of November 2016 - January 2017. Nonetheless, if confirmed in August-September, slight acceleration in Manufacturing sector can provide upward support for the economy in 3Q 2017, support that will be critical as to whether the economy will meet Government expectations for ~2% full year economic expansion.
• Chinese manufacturing PMI gained slightly in July (51.1) compared to weak May (49.6) and June (504.), but growth remains weak. Last time Chinese Manufacturing posted PMI statistically above 50.0 (zero growth) marker was January 2013. This flies in the face of official growth figures coming from China.
• India’s Manufacturing PMI fell off the cliff in July (47.9) compered to already weak growth recorded in June (50.9). Over the last 3 months, India’s Manufacturing sector has gone from weak growth, to statistically zero growth to an outright contraction.

Overall, GDP-weighted BRIC Manufacturing PMI stood at extremely weak 50.4 in July 2017, down from equally weak 50.6 in 2Q 2017. In both periods, BRIC Manufacturing sector grossly underperformed Global Manufacturing PMI dynamics (52.7 in July and 52.6 in 2Q 2017). Russia is the only country in the BRIC group with Manufacturing PMI matching Global Manufacturing PMI performance in July. Russian Manufacturing PMI was below Global Manufacturing PMI in 2Q 2017.

Net outrun: BRIC Manufacturing sector currently acts as a drag on global manufacturing growth, with both India and Brazil providing momentum to the downside for the BRIC Manufacturing PMIs.

2/8/2014: BRIC Manufacturing Rebound: July 2014

Summary of BRIC Manufacturing PMIs released yesterday:

Not that you'd notice from the mainstream media, but Russia's manufacturing is back above 50.0 in July after 8 consecutive months of below-50 readings.

A comfortable growth range for Russian Manufacturing PMIs should be around 53-55, so the economy is still miles away from a robust recovery. Further concern is that July 2014 reading might be similar to a spike in October 2013 that was followed by renewed contraction.

03/10/2011: Manufacturing PMI for Ireland

It's the Groundhog Day in the euro land once again with September PMIs readings coming in at a recessionary levels all over the place (save Germany, which is statistically insignificantly different from stagnation). More on the euro area leading indicators in the follow up post, but first - Irish Manufacturing PMIs.

NCB released Irish Manufacturing PMIs earlier in the morning today and they make for a disheartening reading. Please keep in mind that these are generally volatile, so some interpretations of the short-term data require identifying a trend, rather than short-term fluctuations.

Overall seasonally-adjusted PMI for Manufacturing (PMI-M) simply crashed, to put it bluntly, in September to 47.3 (statistically-significant reading for contraction as it fell below 48.0 which is 1/2 STDEV down from the growth-neutral reading of 50). This marks 4th consecutive month of below 50 readings. PMI-M is now below 12mo MA of 52.1 and 3mo average of 48.4. Previous 3mo average for April-June 2011 was 52.5, so the swing is very strong - 4.1 points for 3mo averages and 5.2 points on September basis.
And a more recent snapshot:
Output sub-index reached back into contraction territory with September reading at 49.8, down from 52.4 in August and back at the level of July. 12mo MA is now at 53.8, well ahead of 3mo average for July-September 2011 of 50.7. You have to go back to 2009 same period reading to hit the numbers lower than the current 3mo average. Overall, however, output sub0-index has been volatile, swinging from positive to negative territory every couple of months or more frequently since April this year.

New orders sub-index has take severe beating reaching 45.8 in September, down from 47.7 in August and marking the fourth month of below-50 readings. Last month's performance was the poorest since August 2009 when the sub-index was at 43.7. New export orders also fell in September, the first reduction in a year, mainly on the back of contracting global demand. Per NCB: "As new orders fell again, firms worked through outstanding business. Consequently, backlogs of work decreased at a substantial pace that was the fastest in 29 months." New Export orders are now at 49.2, down from 53.5 in August. 12mo MA is at 55.7 and 3mo average is 51.3 through September against 3mo average of 56.4 through June.

Again, quoting NCB: "After increasing in August, suppliers’ delivery times shortened marginally in September, although the majority of respondents noted no change in vendor performance. The rate of decline in purchasing activity quickened markedly over the month, and was the
strongest since August 2009. Firms cut input buying in line with falling workloads. Stocks of purchases were depleted markedly again in September, with the rate of decline little changed
from those seen in the preceding two months. Post-production inventories also fell as firms
reduced stock holdings in line with lower new orders. The rate of depletion was solid, but weaker than that seen in August."

Output prices moved deeper into deflationary territory as producers cut factory prices to respond to falling demand. Output prices sub-index is down to 48.6 in September from 49.7 in August, marking the second month of below-50 performance. 3mo average through September is now at 49.6 against 3mo average through July at 54.7. So deflation is biting in the sector.

Input prices sub-index posted continued inflation at 53.8, though the pace of inflation in inputs is continuing to moderate, falling from 80.9 in March 2011. 3mo average through September is now at 57.3 against 12mo MA of 65.8 and 3mo average through July at 68.3.

Combined, the two metrics suggest that overall profitability continues to decline in Irish manufacturing, with rate of decline slowing down as of recent months (more on this later this week, once we have Services PMI data).

Employment once again returned to contraction territory with sub-index for September down to 46.5 from 51.1 in August. This is the lowest reading for the sub-index for any month since September 2010. 12mo MA for the sub-index now stands at 50.7, while 3 mo average through September is at 48.9, against 3mo average through July at 50.7.

Overall, very disheartening performance for Manufacturing that, until recently, was the bright spot on our dark economic horizon.

1/09/2011: Manufacturing PMI for Ireland - a mixed bag for August

Figures for PMIs for Euro area economies released today are hardly encouraging:

• German manufacturing index stands at 50.9 in August, close to contraction, against the local peak of 62.7 in February 2011
• Spain's August data shows fastest fall in output since June 2009, with headline PMI at 45.3.

Now, Irish manufacturing PMIs (released today by NCB) are showing no clear direction from the contraction momentum established in July.

Here are the updated figures:

• Core PMI for manufacturing remains in contraction territory for the third month in a row at 49.7 in August, although the index is marginally up on 48.2 in July. Index 12 mo MA is at 52.2 and 3mo MA is now at 49.2. 2010 same-period 3mo MA is 51.4 against 2009 same period 3mo MA of 43.4. This does not square well with the ESRI assertion that stronger economic performance might emerge in H2 2011.
  
• Output sub-index is out of contraction territory in August (52.4) compared to July (49.8), breaking two consecutive months of contraction.
• New orders sub-index, however, is now at 47.7 down from 47.9 in August, marking the lowest point since September 2010. 3mo MA is now at 48.1 and 12mo MA at 52.7. Per NCB analysis: "The decline in business conditions in August mainly reflected a solid reduction in new orders. Panellists indicated that slowing demand had been behind the contraction in new business, which was the fastest since September 2010".
• In contrast to overall new business measure, sub-index for new export orders increased in August to 53.5 since July 51.3. This marks the eleventh successive month of the index being above 50 expansion marker and the first rise since January 2011. However, August reading was still below the local peak of 61.6 attained in February 2011 and stands well below 12mo MA of 55.7, with 3mo AM of 52.1. New exports demand grew, according to the respondents, in aprticularly strongly in the UK.
  
• Backlogs of work in August were reading 41.7, up on 41.1 in July. The fall in overall new business in August drove this further decline in backlogs of work as companies transferred spare capacity to work on existing projects. This is now the sixth successive reduction in outstanding business and the reduction was substantial.
• August responses pointed to a further and sharper reduction in stocks of finished goods with the sharpest rate of stocks depletion since March - down to 45.2 in August from 49.6 in July. Per NCB: "Post-production inventories have now fallen in each of the past 40 months. Panellists reported that they had made efforts to reduce stock holdings over the month."
• After falling for three successive months, employment increased during August, with the rate of job creation being extremely shallow at 51.1 in August, up from contraction in July of 49.1 and breaking three consecutive months of declines.

Last point to make comes from the final chart above: profit margins have deteriorated in August once again from -15.01 to -15.62 as input prices continued to expand at 58.9 in August, down from 59.3 in July, while output prices switched into contraction territory with a reading of 49.7 in August down from 50.4 in July.

04/08/2011: PMIs, Exports-led Recovery and Jobs - July 2011 data

Based on Manufacturing PMI (see detailed post here) and Services PMI (details here), let's chart Irish economy's progress on the road to the recovery.

First, consider the issues of employment and core PMIs:
So in terms of economic activity, we have moved:

• In Manufacturing from the recovery with mild jobs creation in January 2011 to both employment and output contractions in July 2011.
• In Services, a jobless recovery in January 2011 remains such in July with July reading showing accelerated joblessness and slower growth in output.

Summary of employment indices is extremely worrying at this stage:
Now, in terms of exports-led growth:
While exports performance continues to the upside in both Services and Manufacturing, in both sectors, exports growth is associated with declining employment, not rising. This is now an established trend with both June and July showing jobs declines amidst exports growth in both sectors, in contrast with May, when exports growth in both sectors supported fragile jobs creation.

So far, since January 2008, there were:

• 17 months of jobs-destruction associated exports increases in Services, against just 6 months where jobs creation was associated with exports growth
• 20 months of jobs destruction during coincident exports expansions in Manufacturing, against just one month when jobs creation underpinned exports growth.

Good luck to ya all who hope for an exports-led recovery to yield significant reductions in unemployment any time soon.

03/08/2011: US ISM & Irish PMIs (Manufacturing)

On August 1, US Institute of Supply management monthly manufacturing activity index for July posted the worst performance since July 2009, falling 4.4 points to 50.9 (barely above 50 mark of zero growth). The new orders sub-index dropped into contractionary territory and employment index suffered significant drop. Factory gate prices also contracted signaling a decline in profit margins going forward.

Meanwhile, Irish manufacturing PMIs (published by NCB) for July similarly came in with disappointment. Here are the updated numbers:

• Overall Manufacturing sector PMI declined to 48.2 in July (below 50, signaling contraction of activity), down from 49.8 in June and marking the second consecutive month of contracting sector activity.
• 12-mo average for PMI is now at 52.3, while 3mo average is at 49.9 against previous 3mo average of 56.1.
• In 3-mo to July 2010 PMI stood at 56.1.
• The July reading is the worst since January 2010

• On seasonally adjusted basis, output sub-index also posted second consecutive month of contracting activity with July reading of 49.8, slightly up on June 49.3
• New orders activity was also contracting at 47.9 in July, down from also contractionary 48.7 in June. New orders 12-mo average is now at 53.1 and 3 mo average at 49.8, while previous 3 months average was 58.1.
• New export orders activity continued to grow at a slowing pace, down to 51.3 in July from 51.5 in June and 58.7 in May. 3mo average through July now stands at 53.8 against 3mo average through April at 59.9.

Other sub-indicators:

• Backlogs of work contracted at faster pace of 41.1 in July down from 41.8 in June - the worst reading since August 2009. Sharp decrease in July was mainly reflective of a strong drop in new orders
• Stocks of purchases and suppliers delivery times were all signaling contracting activity
• Stocks of finished goods also signaled tighter manufacturing activity
• Per NCB note: "Attempts by firms to improve cash flow led to a marked reduction in stocks of purchases in July, with the rate of depletion the fastest since August 2010. Stocks of finished goods also fell, although the rate of decline was only slight. Post- production inventories have reduced in each month since May 2008."
  

On profit margins side:

• Again per NCB note: Increased oil and commodity prices led to a further rise in input prices. Despite easing for the fourth month running, the rate of cost inflation remained sharp, and faster than the long-run series average." Specifically: input prices sub-index stood at 59.3 in July, down from 63.5 in June. 3mo average through July now stands at 63.9, while 3mo average through April was 75.1 - an improvement in the rate of inputs costs growth, but these continue on the upward trajectory.
• As NCB note: "In response to higher input prices, manufacturers raised their output charges. However, strong competition and weakening demand meant that the rate of inflation was only slight." Again, output prices sub-index fell to 50.4 in July, from 53.2 in June and 12mo average now stands at 52.8, while 3 mo average is at virtually identical 52.6. This is down from the previous 3moo period (through April 2011) which was 57.4.
• So profit margins are continuing to deteriorate (second chart below).
  

Per chart above last, employment conditions continued to deteriorate in Manufacturing, with sub-index for employment moderating contractionary signal to 49.1 in July from 48.3 in June. This marked third consecutive month of employment sub-index below 50. While 12mo average stands at 50.2, 3mo average through July is now at 49.1, contrasted robustly by 3mo average through April 2011 at 54.0. Same period (3mo through July) of 2010 averaged 49.5 reading.

This, of course is disheartening. The chart below updates the pace of 'recovery' in Manufacturing for July data:

Please note: data is sourced from NCB publication, while all charts and statistical details as well as analysis are supplied by me.

05/07/2011: Employment in Services and Manufacturing - June 2011

As promised earlier, analysis of employment data from Manufacturing and Services PMIs for June 2011.

• Headline on Services PMIs: After posting only marginal growth in the previous month at 50.5, Irish services activity rose at a faster pace in June to 52.4. However, overall Q2 2011 average at 51.0 signals lower rate of expansion than Q1 2011 at 53.4. Current index is above it's 12mo MA of 51.6.
• Headline on Manufacturing PMIs: June activity signals a slowdown at 49.8, down from expansionary May reading of 51.8. Q1 2011 expansion of 56.1 average has moderated through Q2 2011 to 52.5. 12mo MA is at 52.6.
• Employment sub-index in Manufacturing showed further acceleration in the rate of decline from 49.9 in May to 48.3 in June. The sub-index now stands below 12mo MA of 50.2. Q1 2011 average was expansionary 53.2 and despite two consecutive months of contractions, Q2 sub-index still reads 50.7. This compares favorably relative to Q3 2010 reading of 46.8 and Q4 2010 reading of 49.9. Employment in Manufacturing has now fallen for two months, breaking expansionary readings trends established over December 2010-April 2011.
  
• Employment sub-index in Services remained flat at 48.1, signaling continued contraction in May and marking a second consecutive month of contractions since an outlier expansion in April 2011 to 51.1. 12mo MA is now at 48.7, while Q1 2011 reading was 49.2, accelerating down to 49.1 in Q2 2011. In comparison, Q3 2010 reading was 48.9 and Q4 2010 reading was 47.6, so the rate of jobs attrition in the sector has declined in H1 2011 relative to H2 2010. With April 2011 out-of-line reading of expansion, this index remains in contractionary territory in 39 out of 40 last months

With both Manufacturing and Services signaling contractions in employment, we are now firmly into jobless recovery territory in Services and stepping into the recessionary territory for Manufacturing.

It is worth noting that volatility of employment sub-index has risen since the beginning of the crisis in Manufacturing, but declined in Services, most likely due to the persistent trends in domestic services. The same pattern is true for core PMIs.

02/07/2011: Irish Manufacturing PMI

Last month I was expressing some concerns about the direction of the PMIs, as well as questioning the argument that confidence of its own, is causally capable of driving fundamentals, rather than reflect them. The latest data for PMIs in Manufacturing from NCB Stockbrokers released today (covering June 2011) confirms the validity of my concerns. Here are the headlines:

• Manufacturing PMI for June fell to 49.8 - below the critical 50 mark, implying contraction in the overall manufacturing activity. The PMIs are down from 51.8 in May 2011. This is the first time since September 2010 that PMIs are below 50. While in order to establish a trend the PMIs should drop below ca 48, the swing from 51.8 to 49.8 is statistically consistent with at least 70% chance of this drop being a sign of real deterioration.
• The 12mo MA now stands at 52.6, with 3mo average at 52.5 down from 56.1 in 3 months for January-March 2011. Same period 3mo average for 2010 was 53.1 and for 2009 it was 39.3.
• Output overall also moved into contraction territory with June reading of 49.3 down from May reading of 52.6. Again, the magnitude of the swing is statistically significant. 12 mo MA now stands at 54.0 while 3mo average at 53.5 down from the previous 3mo average of 59.2.
• Output has not been below 50 since February 2010.
  

• New orders are down to 48.7 in June from 52.9 in May - a very strong decline and are now below 50 for the first time since September 2010. In Q2 2011 the average new orders reading was 53.0 against 58.6 for Q1 2011. 12mo MA is 53.3 in June 2011 well ahead of the current monthly reading.
• New export orders are the only component of PMIs that still signals expansion, albeit at 51.5 in June this expansion is much slower than 58.7 recorded in May 2011. New exports orders 12mo MA in June was 56.0. Q2 2011 reading of 56.4 is significantly below Q1 2011 reading of 60.4. same period average for 2010 was 57.4.
• Backlogs and inventories are also signaling troubles ahead. Per NCB analysis: "As has been the case in each month since March, backlogs of work at Irish manufacturers decreased in June. Moreover, the rate of depletion accelerated sharply to the strongest since October 2009. According to respondents, reduced demand was a key factor behind the fall in outstanding business. More than 31% of panellists reported a drop in backlogs over the month, compared with just 9% that posted a rise." While inventories are still being depleted, the rate of depletion has slowed down to lowest since May 2008.
• Suppliers delivery time extended to 19 months with the survey respondents highlighting "both shortages of raw materials and capacity pressures at suppliers as reasons for the latest deterioration."
• Lastly, for the second consecutive month Irish producers cut back on their purchases of inputs into production in line with falling orders.
  

• On prices front, "June data pointed to a further considerable increase in input prices at Irish manufacturing firms. Input costs have now risen throughout the past year-and-a-half. However, the rate of inflation eased for the third month running to the weakest since September 2010. Respondents noted that oil-related costs had been a key factor behind higher input prices." Input price index stood at 63.5 in June - down from 68.9 in May and down on 3mo and 12mo averages. At the same time, output prices index fell from 54.3 in May to 53.2 in June. "The rate of inflation [in terms of output prices] moderated for the third consecutive month to the slowest in the current period of increased charges. Panellists reported that the passing on of higher raw material costs to clients was the principal cause of the latest rise in output prices." So output prices are not catching up with input prices, implying margins are not being rebuilt.
  

• In terms of employment, "staffing levels at Irish manufacturing firms decreased for the second consecutive month in June, with respondents largely attributing this to falling workloads. The rate of job cuts accelerated to the steepest since September 2010. All three monitored market groups posted a decline in employment." Employment index in manufacturing fell to 48.3 in June from 49.9 in May. The index now stands below 12mo average of 50.2, Q1 2011 reading of 53.2 and Q2 2011 average of 50.7. Q2 2010 reading was 49.0 - ahead of June 2011 reading.

All of this means that I was correct in pointing to the weaknesses in PMIs in May 2011 and, unfortunately, it means that per PMIs our Manufacturing has now re-entered a recessionary territory:

05/01/2011: Manufacturing PMIs - December 2010

Manufacturing PMIs were released earlier this week by NCB Stockbrokers (a truly useful service for all concerned with the Irish economy - see the third post on PMIs to come for the true reason). Here are the updated charts and some comments:
First what matters most on GDP side - second consecutive month of declining growth on New Exports Orders side - December reading was at (still expansionary) 54.0, down from 54.7 in November and 54.9 in October. 12-months average was 55.5, so we have a signal of relative growth slowdown into Q4 (average 54.5), compared with Q2 and Q1 (averages of 57.4 both), but of Q3 (52.7).

Total New Orders are robustly up to 53.2 reading for December (12-months average is 51.7), but December increase was not enough to push poor performance in Q4 (average for the quarter is 51.6).

Overall PMIs for Manufacturing are signaling relatively positive momentum, rising to 52.2 in December, from 51.2 in November, marking third consecutive monthly rise. December reading is above 12-months average of 51.2 as is Q4 average reading (51.4).

Here's a close-up:
But what about capacity?
So far, capacity remains below growth line (50 reading signifies expansion, of course), suggesting - strongly - that Irish companies are not running out of existent capacity yet. Which means productivity will continue grow, and that's the good news. The bad news is that with capacity remaining underutilized, there's no real hope for strong growth in either wages or employment.

Although index of Employment rose above 50 line - reaching 50.5 in December for the first time since May 2010 (when it stood at 51.5 - and then again, nothing really happened on employment side, as sustained jobs creation will require consistent above 51.3-52 readings in the index). Clearly, Employment prospects have improved - December reading was 2.6 points above 12-mo average reading of 47.9, and Q4 average - at 49.9 - is almost touching jobs-neutral expansion.

Most worrisome to me is the New Exports Orders data - as discussed above, although the series is generally more volatile than Total Orders series, it is clear to me that going forward, domestic demand of the Total Orders is not going to hold.

Another issue - more of a question, than concern is: backlogs of orders rising appears to be driving up forward employment expectations. There seem to be some 3mo plus lag in the two series, so delivery time remaining relatively benign, but under pressure, it is difficult to make a call on employment index reading. That said, employment index for manufacturing does show stronger correlation, historically with overall sector PMIs than in the case of services (but more on this in the third post on PMIs later today.

Again, the credit for data goes to NCB Stockbrokers, but analysis (and any errors it may contain) is solely my own.