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Daily Shot: Manufacturing Slowdown Turns Rampant

Published 09/02/2015, 07:17 AM
Updated 07/09/2023, 06:31 AM
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We begin with an update on global manufacturing trends.
In the United States, the ISM Manufacturing PMI report showed how the recent US dollar strength is choking off American manufacturing recovery.
IMS M-PMI vs Trade Weighted USD 2010-2015
Source: St Louis Fed

New export orders have weakened sharply as a stronger dollar makes US products more expensive for foreigners (note that PMI < 50 means contraction).
New Export Orders 2005-2015

Moreover, over half the respondents indicated that customers' inventories were too high. This doesn't bode well for new orders going forward.
Customer Inventories 2013-2015
Source: ISM, h/t @NickatFP

In Europe, the Markit manufacturing PMI report showed a surprising slowdown in Ireland's manufacturing sector.
Ireland M-PMI 2012-2015
Source: TradingEconomics.com

Energy markets weakness is taking its toll on Norway's manufacturing.
Norway Manufacturing PMI 2005-2015
Source: TradingEconomics.com, Norwegian Association of Purchasing and Logistics

The manufacturing sectors in Brazil and Russia continue to contract.
Brazil M-PMI 2011-2015
Source: TradingEconomics.com, Markit Economics

I discussed the situation in China and other Asian economies yesterday. Put all this together and it becomes clear that the slowdown in manufacturing activity is a global trend.
JPMorgan Global M-PMI 2007-2015
Source: Markit

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Turning to Asia...
We had another ugly market open in Shanghai. Time to arrest more people for spreading negative rumours?

SSEC Daily

Source: Investing.com

No worries, the "Beijing put" is still in play as China Securities Finance Corp will likely step in to buy shares of state companies again. After all the government already owns these firms — why not increase the holdings?

In spite of the recent selloff, according to some measures, mainland China's share prices are still quite rich.
China's Valuation Premium Over Hong Kong 2010-2015
Source: @business
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Commodity-export-dependent economies remain under pressure, and this is not limited to emerging markets.
Australia GDP Annual Growth Rate 2005-2015
Source: TradingEconomics.com, Australian Bureau of Statistics

Canada officially enters a recession - a mild one so far.
Canada GDP Growth 2012-2015
Source: TradingEconomics.com, Statistics Canada
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Turning to Europe, here are select economic trends. Italy had two consecutive quarters of growth for the first time since 2011. How long can it manage to stay out of recession?
Italy GDP 2005-2015
Source: TradingEconomics.com, National Institute of Statistics (iSTAT)

The Eurozone unemployment rate was better than consensus — down to a 3.5-year low. The health of the labour markets, however, remains highly uneven across the member states.
Euro Area Unemployment Rate 2010-2015

Source: TradingEconomics.com, Eurostat
Euro Area Unemployment Rates, July 2015
Source: @fastFT

The Swiss National Bank's (Swiss central bank) FX holdings (mostly euros) continued to rise in July. The latest increase was driven by Greece, with some private-sector flows from Greece (and possibly other periphery nations) going outside the euro area. This tells us that the SNB is not willing to let the Swiss franc strengthen indefinitely.
SNB Foreign Currency Positions 2006-2015

Disclosure: Originally published at Saxo Bank TradingFloor.com

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