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The Eurozone Economy Plunges Back Into a Severe Decline

Eurozone business activity fell sharply as countries introduced more aggressive measures to counter rising COVID infection rates.
Flash PMI Signals Steep Downturn in November

IHS Markit reports PMI Signals Steep Downturn in November Amid COVID Lockdowns.

Key Findings

  • Flash Eurozone PMI Composite Output Index at 45.1 (50.0 in October). 6-month low.
  • Flash Eurozone Services PMI Activity Index at 41.3 (46.9 in October). 6-month low.
  • Flash Eurozone Manufacturing PMI Output Indexat 55.5 (58.4 in October). 4-month low.
  • Flash Eurozone Manufacturing PMI  at 53.6 (54.8 in October). 3-month low.

The flash IHS Markit Eurozone Composite PMI® slumped from 50.0 in October to 45.1 in November, its lowest since May. With the exceptions of the declines seen in the first two quarters of this year, the average PMI reading of 47.6 in the fourth quarter so far is the lowest since the closing quarter of 2012 (during the region’s debt crisis) and indicative of a steep decline in GDP.

The deteriorating performance was broad-based, albeit with the service sector hardest hit from virus containment measures. While manufacturing output growth merely slowed in November to the lowest since the start of the sector’s recovery back in July, attributable to a marked slowing in order book growth, service sector output fell for a third month running, with the rate of decline accelerating sharply to the fastest since May.

A near-stalling of manufacturing output growth was exacerbated by an increasingly severe drop in services activity, pushing the flash composite PMI down from 47.2 to 42.4

Employment meanwhile fell across the eurozone as  a whole for a ninth consecutive month, with the rate of job losses holding steady on the post-pandemic low seen in October.

By country, employment rose in Germany for the first time since February, and France saw the lowest number of job losses since the pandemic struck. Job cuts deepened in the rest of the region as a whole, however, to the steepest since June.

…click on the above link to read the rest of the article…

Canada Catches America’s Cold – PMI Plunges To 4 Year Lows

Canada Catches America’s Cold – PMI Plunges To 4 Year Lows

As goes America, so goes Canada it seems. Following the collapse in both Manufacturing and Services survey data in the US, Canada’s PMI just collapsed most since Feb 2016, back into contraction for the first time since March 2015.

From a 12-month high of 60.6in August, Ivey PMI collapsed to a 4-year lows of 48.7…

Source: Bloomberg

Under the hood things are mixed (but hurting in the most important areas)

  • Ivey employment index decreased to 49.6 in September from 52.7 in prior month
  • Ivey inventory index decreased to 50.5 in September from 54.8 in prior month
  • Ivey supplier index increased to 50.2 in September from 49.9 in prior month
  • Ivey prices index increased to 56.9 in September from 51.3 in prior month

Time to restart rate-cuts.

India’s Economy Crashes After “Mind-Bogglingly Inane” Tax System Strikes Back

India’s Economy Crashes After “Mind-Bogglingly Inane” Tax System Strikes Back

With just a hint of schadenfreude, we note that, following our discussion of “how to destroy an economy”, India’s Composite PMI collapsed to 46.0 in July – its lowest on record (well below the kneejerk lows after demonetization in November) as the “mind-bogglingly inane” new tax system and demonetization efforts continue to crush the poor and feed the wealthy.

As Goldman Sachs notes India’s Nikkei Markit services PMI contracted in July after reaching a 8-month high in June, following a decline of manufacturing PMI on Tuesday. The fall was led by a significant decline in new business, suggesting a worsened business sentiment after the GST implementation on July 1.

Main points:

  • India’s Nikkei Markit services PMI contracted to 45.9 (the lowest reading since September 2013). Combined with the manufacturing PMI reported on Tuesday, the July composite PMI fell to 46.0, the lowest reading since March 2009.
  • Among subcomponents, the new business index fell the most to 45.2 (from 53.3 in June), reflecting disruptions caused by the GST.
  • As the press release from Markit Economics mentioned, “Most of the contraction was attributed to the implementation of the goods & services tax and the confusion it caused”.
  • The employment index for services fell to 48.9 (from 51.8 in June).
  • That said, the index for business expectations rose to a 11-month high to 62.3, suggesting optimism from services providers about the future once they have more clarity about the new tax system.
  • The output price index rose to 54.6 (from 51.0 in June), while the input price index moderated to 51.7.
  • Overall, PMI data for July suggest a significant drag on new business activity post the GST implementation. That said, optimism expressed by both manufacturers and services providers about the future is encouraging and suggest a potential improvement in activity once businesses adjust to the new tax system.

From 8-month highs to record lows… why does any one put any faith in the useless ‘soft’ surveys?

…click on the above link to read the rest of the article…

UBS Calls It: “The Global Credit Impulse Suddenly Collapsed To Negative”

UBS Calls It: “The Global Credit Impulse Suddenly Collapsed To Negative”

One month ago, a skeptical Deutsche Bank warned that just as global macro surprises and economic momentum had hit 6 year highs, the bullish story was set to rollover from its current elevated levels…

… primarily as a result of a series of disappointing data points out of China…

… which would be manifest in commodity prices first then across the entire risk spectrum: “Lower macro surprises would be consistent with a tactical pull-back for equities (especially against the backdrop of still-elevated readings on our market sentiment indicators) as well as a roll-over in cyclicals versus defensives.”

While it may not have known at the time, what Deutsche Bank was really saying is that the primary driver behind global growth in the past decade – China’s credit creation, or rather its first derivative, the credit Impulse out of Beijing – was about to turn negative.

One month later, that is what UBS’ Arend Kapteyn discovered when in a report published overnight, the Swiss bank economist reported that the most important variable when it comes to global economic expansion (and alternatively, contraction) has just turned negative for the first time in three years.

In the note, UBS writes that “Our global credit impulse (covering 77% of global GDP) has suddenly collapsed” and explains that “as the chart below shows the ‘global’ credit impulse over the last 18 months is essentially mainly China (the green shaded bit), which even now is still creating new credit at an annualized rate of around 30pp of (Chinese) GDP. But the credit impulse is the ‘change in the change’ in credit and even the Chinese banks could not sustain the recent extraordinary pace of credit acceleration. As a result: whereas back in Jan ’16 the global credit impulse was positive to the tune of 3.8% of global GDP (of which China comprised 3.5% of global GDP) it has now fallen back to -0.1% of global GDP (China’s contribution is -0.3% of global GDP).

…click on the above link to read the rest of the article…

Canada PMI Crashes Into Contraction

Canada PMI Crashes Into Contraction

From First to Worst!!

Unadjusted, this is the weakest data in at least 2 years…

Ivey Purchasing Managers Index

Moar recession? But for America, low oil prices are “unequivocally good” still right?

Biggest Crash In South Korea Exports Since 2009 Confirms Global Trade In Freefall

Biggest Crash In South Korea Exports Since 2009 Confirms Global Trade In Freefall

While the market’s attention overnight was focused on China’s crumbling manufacturing and service PMI, data which was already hinted in the flash PMI reports earlier in August, the real stunner came not from China but from South Korea, which last night reported an unprecedented 14.7% collapse in exports, far worse than the -5.9% consensus estimate, and more than 4 times worse than July’s 3.4%.

The number is critical because not only do exports account for about half of South Korea’s GDP (with Samusng alone anecdotally accountable for 20% of the country’s GDP), but because it also happens to be the first major exporting country to report monthly trade data. That makes it the perfect barometer of global trade flows, or as the case may be, the canary in the global trade coalmine. It also confirms what we reported just one week ago when we said that “Global Trade Is In Freefall“.

The carnage in Korean trade is unmistakable in the following Barclays chart:

Putting South Korea plunging trade in context, this was the worst monthly decline since August 2009, and was coupled by an 18.3% tumble in imports, the biggest drop since February. Worse, South Korea may soon run into a true Black Swan: a trade deficit: in August, the country’s trade surplus tightened to just $4.3 billion, one third worse than tha $6.1 billion expected, and nearly less tthan half the $7.7 billion surplus in July, suggesting South Korea may be forced to dip into its reserves next, or finally engage in what many have said is long overdue: the next Asian currency devaluation as China’s FX war spills over to what may be the most important harbinger of global trade.

 

…click on the above link to read the rest of the article…

The Seventh-Largest Economy in the World Spirals Down

The Seventh-Largest Economy in the World Spirals Down

HSBC, which knows a thing or two about the world, and about Brazil, is bailing out of Brazil.

It’s unloading its “entire business in Brazil,” it said this week, including retail banking and insurance. It will hand its long list of wealthy clients and over 21,000 employees to Bradesco, one of the largest private banks in Brazil, for $5.2 billion. Too much? Bradesco’s stock has since plunged over 9%.

Once the deal gets regulatory approval and closes, HSBC is out of Brazil. “The transaction represents a significant step in the execution of the actions announced during the Investor Update on 9 June 2015,” it said. After that update, Reuters had described HSBC’s motivations with these choice words:

For shareholders, betting on Brazil was risky as lenders grapple with tax hikes, weak credit demand, rising defaults, and the impact of what looks likely to be the country’s worst recession in over two decades.

The seventh largest economy in the world in 2014, according to the World Bank, is spiraling down, with private sector output, as Markit put it, falling at the “sharpest pace since March 2009.”

This is how Markit titled its Brazil Services PMI report on Wednesday: “Service sector activity drops at joint-fastest rate in survey history.”

The index hit 39.1 in July (50 is the dividing line between contraction and expansion), the fifth month in a row of contraction, with all sub-sectors in the survey “registering substantial falls in business activity.”

To add to the toxic mix, costs soared, with the rate of increase reaching an 81-month high, third fasted in survey history, due to “inflationary pressures, exchange rate factors, and client fee adjustment.” No green shoots in the immediate future: new orders fell for the fifth month in a row. The “deteriorating operating environment” caused the pace of job losses to accelerate “to a survey record.”

 

…click on the above link to read the rest of the article…

Greek Stocks, Economy Collapse, Suffer Worst Declines In History

Greek Stocks, Economy Collapse, Suffer Worst Declines In History

The Athens Stock Exchange reopened on Monday and unsurprisingly, some folks were selling.

Trading was suspended five weeks ago after PM Alexis Tsipras’ dramatic midnight referendum call precipitated capital controls and a lengthy bank “holiday.” Shares opened lower by nearly 23% and the country’s banks traded limit-down, which makes sense because they are, after all, largely insolvent. Here’s NY Times:

The Athens Stock Exchange plunged 22.8 percent when it reopened on Monday after a five-week shutdown imposed by Greek authorities as part of efforts to prevent a financial collapse.

Bank stocks, which are particularly vulnerable as Greek lenders are set for new recapitalization in the coming months, took a battering, falling by as much as 30 percent.

Although foreign investors face no restrictions in the Athens exchange, local traders can only use existing cash holdings to buy shares; they are prohibited from tapping local bank deposits to buy shares as the authorities seek to prevent capital flight.

Asked about the harrowing decline, European Commission spokeswoman Mina Andreeva had no comment but did say that Brussels has “taken note” of the reopening. Amusingly, she also said the decision was made by “competent” Greek officials. A ban on short-selling was due to expire on Monday but will be extended, an unnamed official told Reuters.

Meanwhile, monthly PMI data from Markit confirmed that the Greek economy suffered an outright collapse in July. Last month marked the 11th consecutive month of contraction, but it was the depth of the downturn that was truly shocking as the index plummeted to 30.2 from 46.9 in June. It was the lowest print on record. New orders plunged to 17.9 from 43.2.

“July saw factory production in Greece contract sharply amid an unprecedented drop in new orders and difficulties in purchasing raw materials,” Markit said. Here’s more from the report:

…click on the above link to read the rest of the article…

 

 

Manufacturing Hit by Oil-Price Plunge? Southeast Worst Since Financial Crisis

Manufacturing Hit by Oil-Price Plunge? Southeast Worst Since Financial Crisis

Atlanta Fed suspects oil bust, strong dollar.

Despite President Obama’s emphatic assurances in the State of the Union Address that “our economy is growing and creating jobs at the fastest pace since 1999,” there have recently been some uncomfortable squiggles, so to speak.

The collapse in the prices of oil, natural gas, and natural-gas liquids has started to make its imprint on the largest hydrocarbon producer in the world, namely the US of A. Oilfield layoffs and project cancellations are raining down on the oil patch on a daily basis. Suppliers are hit too. Many energy stocks are in the process of evisceration. Energy junk bonds are in a rout.

But consumers love it – those who aren’t losing their jobs over it – because they spend less on fuel. Consumers are voters. So politicians love it because voters love it. Hence, it’s good for the economy. I get that.

These sorts of squiggles have been worming their way into national numbers. For example, Markit’s Services PMI for December dropped to 53.3, down for the sixth month in a row, after having peaked in June. This was “not just a one-month wobble,” the report said, as the economy “lost significant growth momentum at the close of the year.” But it remained above 50, the dividing line between expansion and contraction. It’s still an expansion, and “growth is merely slowing from an unusually powerful rate rather than stalling.”

…click on the above link to read the rest of the article…

 

What the Heck Is Happening to US Manufacturing?

What the Heck Is Happening to US Manufacturing?

The worst month in the Southeast since the Financial Crisis.

Despite President Obama’s emphatic assurances in the State of the Union Address that “our economy is growing and creating jobs at the fastest pace since 1999,” there have recently been some uncomfortable squiggles, so to speak.

The collapse in the prices of oil, natural gas, and natural-gas liquids has started to make its imprint on the largest hydrocarbon producer in the world, namely the US of A. Oilfield layoffs and project cancellations are raining down on the oil patch on a daily basis. Suppliers are hit too. Many energy stocks are in the process of evisceration. Energy junk bonds are in a rout.

But consumers love it – those who aren’t losing their jobs over it – because they spend less on fuel. Consumers are voters. So politicians love it because voters love it. Hence, it’s good for the economy. I get that.

These sorts of squiggles have been worming their way into national numbers. For example, Markit’s Services PMI for December dropped to 53.3, down for the sixth month in a row, after having peaked in June. This was “not just a one-month wobble,” the report said, as the economy “lost significant growth momentum at the close of the year.” But it remained above 50, the dividing line between expansion and contraction. It’s still an expansion, and “growth is merely slowing from an unusually powerful rate rather than stalling.”

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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Olduvai II: Exodus
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