A lot of news overnight as we head towards an extremely busy week ahead.
1) First in China we have the private sector PMI reading from HSBC (I believe the government figure is released overnight tonight). It remained steady at slightly (ever so) contraction - 49.9. Close enough to 50 to consider it a meh.
- China's manufacturing sector contracted for a third consecutive month in September, while factory inflation quickened.
- The HSBC purchasing managers' index (PMI), which previews business conditions in a range of industries before official output data, was at 49.9 in September, unchanged from August. The final PMI, released on Friday, was stronger than the flash reading published last week.
- The PMI reinforces our view that the potential slowdown in China's economy will likely be a gradual, said Connie Tse, an economist at Forecast in Singapore. The trade sector no doubt faces increasing risks, but recent export growth momentum is holding up decently. China is not facing a collapse in global demand yet, as witnessed in 2009.
- The latest reading represents the longest period of contraction since the global financial crisis, when it came in below 50 for eight successive months from August 2008.
- The HSBC survey's new export orders sub-index remained below 50 for a fifth straight month, while the sub-index for overall new orders hovered below 50 for a second successive month.
- China's official PMI, which is due to be published on Saturday, may have edged up in September, after a rise in the previous month from a 28-month low in July, driven by seasonal factors and domestic demand. The official PMI, which is weighted more toward big state firms, generally paints a rosier picture of Chinese factories than that of HSBC, which includes small private firms that have been hit harder by credit curbs and weaker demand.
- Friday's data showed input costs rising rapidly, which could imply upward pressure on consumer inflation. Factory inflation in China quickened markedly in September, with the sub-index for input prices climbing to a four-month high of 59.5 in September from 55.9 in August.
2) German retail sales dropped quite dramatically - another sign the engine of Europe is slowing.
- German retail sales declined the most in more than four years in August as concerns about the economic impact of Europe’s sovereign debt crisis sapped consumers’ willingness to spend. Sales, adjusted for inflation and seasonal swings, slumped 2.9 percent from July, when they rose 0.3 percent, the Federal Statistics Office in Wiesbaden said today. That’s the biggest drop since May 2007. Economists forecast sales would fall 0.5 percent.
- The retail sales figures “are volatile and don’t reflect that the trend remains positive as consumer confidence is actually holding up relatively well,” said Christian Schulz, an economist at Joh. Berenberg Gossler & Co in London. “However, the crisis may prompt households to postpone some big-ticket purchases this winter.”
3) The most strange figure was inflation in the Eurozone which surged by a massive half a percent, from 2.5% to 3.0%. One wonders if this will have any impact on the ECB, which is supposed to be the watchdog for price stability, but is being pressured to cut rates.
- European inflation unexpectedly accelerated to the fastest in almost three years in September, complicating the European Central Bank’s task as it fights the region’s worsening sovereign-debt crisis.
- The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008. Economists had projected inflation to hold at 2.5 percent, according to the median of 38 estimates in a Bloomberg survey.
- The ECB, which aims to keep annual gains in consumer prices just below 2 percent, said earlier this month that inflation may average 2.6 percent this year and 1.7 percent in 2012.
- Italy’s harmonized inflation quickened to 3.5 percent in September from 2.3 percent in August. In Germany, Europe’s largest economy, inflation also accelerated more than economists forecast this month, with consumer prices rising 2.8 percent from a year earlier, up from an annual 2.5 percent. Spain’s harmonized inflation rate jumped to 3 percent from 2.7 percent. There’s no September data available for France.