The first day of the month is when global manufacturing reports are released. U.S. ISM Manufacturing comes out at 10 AM and this has definitely been the strongest part of the U.S. economy (ex federal government spending!) the past few years as international markets, especially of the Asian kind, have been kind to U.S. exporters. Positive reports across the globe have generally led to outsized gains the first day of the month as well.
Thus far, we have a mixed bag - China has rebounded in its Purchasing Managers indexes, while most of the European manufacturing gauges fell back; albeit from quite high levels. And to no one's surprise (except perhaps those at the Fed), prices continue to jump across the globe. It is now widely expected the ECB will be raising rates next week as their sole mandate is inflation fighting.
First to China where we have 2 PMI reports - government and private. This is about the only report out of China I put much weight in, simply because there is a private measure competing with what the government churns out. Please keep in mind we had Lunar New Year in February so some of the slowdown in the previous month was overstated.
- China's manufacturing sector regained momentum in March, easing fears of a sharp slowdown, on strengthening demand for autos and machinery, according to surveys released Friday.
- The state-affiliated China Federation of Logistics and Purchasing reported its purchasing managers index, or PMI, rose to 53.4 last month, from 52.2 in February and 52.9 in January.
- The rebound in demand was partly due to the dampening effect of a weeklong holiday for the Lunar New Year in February, it said. The rise ended a three-month decline, though the reading has remained above 50, the benchmark for expansion, for over two years.
- Bank of America-Merrill Lynch economist Lu Ting said the data was distorted by migrant workers returning to their jobs after a weeklong Lunar New Year holiday and high inventory levels may point to a looming slowdown in manufacturing.
- A second, competing survey, the HSBC China Manufacturing Purchasing Managers Index, edged up to 51.8 in March from a seven-month low of 51.7 in February.
- Strong new orders for vehicles, machinery, equipment, furniture and garments suggest that demand is picking up in those key sectors, economist Jun Ma of Deutsche Bank Hong Kong said.
- Input prices rose at a slower pace, the survey suggested.
- The HSBC survey covers 400 companies. The federation's report covers 820 companies across a range of industries.
Over in Europe (obviously the main focus is on powerhouse Germany), via Bloomberg
- Factory growth from Germany to Switzerland to the U.K. slowed in March as the region’s recovery struggled to keep momentum, leaving the global economy reliant on emerging markets to drive expansion.
- A gauge of manufacturing in the 17-member euro region fell to 57.5 from 59 in February.
- Europe’s economy faces headwinds from surging energy costs burdening businesses and households, and a spate of government austerity measures. Faster inflation may prompt the ECB to raise interest rates next week, pushing the euro higher and hampering the region’s exporters by making their goods more expensive.
- Today’s data adds to signs “that in the developed world growth in the manufacturing and trade-led cycle is petering out,” said David Owen, chief European economist at Jefferies International. “These countries will have to strengthen domestic demand to offset the falloff in exports. The euro exchange rate certainly doesn’t help exporters, even within the euro area, as Chinese goods are much cheaper.”
- The index in Germany, Europe’s largest economy and the region’s manufacturing powerhouse, dropped to 60.9 from 62.7 while the gauge of U.K. manufacturing growth fell to 57.1 in March from 60.9.
- In the U.K. prices charged index hit a survey record.
- Sustained growth in orders allowed European manufacturers to pass on the costs of soaring raw materials to customers, with prices rising at their fastest rate since at least late 2002. The output price index rose to its highest level since Markit began tracking it in November 2002.