- Index reaches highest point since September 2022.
- Production, employment, orders & inventories all advance.
- Price index strength builds momentum.
USA| Apr 01 2024U.S. ISM Manufacturing PMI & Prices Strengthen in March
by:Tom Moeller
|in:Economy in Brief
USA| Apr 01 2024U.S. Construction Spending Unexpectedly Declines for the Second Straight Month in February
- Construction spending -0.3% m/m in Feb.; +10.7% y/y, the lowest since Sept. ’23.
- Residential private construction rises 0.7% m/m, led by a 1.4% gain in single-family building.
- Nonresidential private construction drops 0.9% m/m, down for the second consecutive month.
- Public sector construction falls 1.2% m/m, w/ both residential & nonresidential public construction down 1.2% m/m.
Japan| Apr 01 2024Japan’s Tankan-Solid to Strong Even If Not As Strong As Expected
Japan's Tankan report for the first quarter registered strong readings across the board. The manufacturing assessment for large companies backed off to a +11 in the first quarter of 2024 compared to +13 in the fourth quarter of 2023. Large manufacturers log one of the weaker readings in the report with a queue percentile standing in its 53rd percentile compared to a slew of 90th percentile standings across assorted services sectors. The nonmanufacturing index rose to 34 in Q1 2024 from 32 in Q4 2023 for large companies and it has a 98.7 percentile standing – quite strong. The total industry index was unchanged at 22 in Q1 2024; it has a strong 92-percentile standing. So, what’s the issue?
The reading for large companies, particularly large manufacturing companies, tends to be the bellwether for this report. Despite widespread strength in the nonmanufacturing readings, the step back in the Q1 manufacturing assessment is a disappointment for the bellwether reading. The current assessment of Q1 at +11 came in one point above expectations while the assessment for the outlook came in one point below what had been expected- hardly earthshaking.
However, the outlook for manufacturing for the second quarter also showed improvement, moving up to a +10 reading in Q2 2024 from +8 in Q1 2024. For nonmanufacturing, the outlook held at +27 in Q2, the same as in Q1. These two sector readings combined for an all-industry outlook of +19 in Q2 compared to +17 in Q1. Viewed as percentile standings, the manufacturing outlook has a 64-percentile standing which is above its median but not strong. The nonmanufacturing outlook has a 98.7 percentile standing, quite strong and in line with the strong readings produced in the current quarter as well. The all-industry outlook has a standing in its 85th percentile, stronger only about 15% of the time.
There have been expectations for slightly strong readings from large manufacturers and so for some this is some more disappointing report than simply looking at the numbers. However, the numbers on their face are firm-to-strong and the rankings of the reported figures for the first quarter and for the outlook are solid and for the services sector they're extremely strong. The drop off for the current quarter assessment for large enterprises to +11 from +13 breaks a string of three straight improvements- still the ranking of the reading is above its median. Best of all, expectations are still improving compared to what they were a quarter ago.
While the survey results for establishment of other sizes are not considered to be a bellwether in this report, for medium-sized firms the manufacturing assessment was unchanged at a +6 in Q1 2024, producing a 70-percentile standing; the manufacturing outlook for Q2 2024 for medium-sized firms held at a +5 which produced a 74.7 percentile standing. For smaller firms, the manufacturing situation was weaker. Small enterprises reported a -1 reading for manufacturing in Q1 2024 after logging a +2 reading in Q4 2023. However, this still has a 60th percentile standing for them, above their historic median. The outlook for manufacturing small firms held at zero in Q2 2024, the same as the first quarter; that reading has a 76-percentile standing. Again, that's well above its median reading (which occurs at a ranking of 50%), and while the standing is solid, it is well short of being construed as strong.
USA| Mar 29 2024U.S. Personal Spending Strengthens; Core Price Gain Moderates
- Spending growth rebounds.
- Disposable income increase slows.
- PCE price index gain weakening is broad-based.
by:Tom Moeller
|in:Economy in Brief
- $91.84 billion deficit in Feb., larger than expected.
- Exports gain 2.8%, up for the third straight month.
- Imports increase 2.3%, up for the fifth month in six.
Global| Mar 28 2024Charts of the Week: The Soft Landing Narrative (Again)
Recent weeks have seen heightened optimism in financial markets that the global economy is on course for a soft landing. This optimism is rooted in a number of factors including stronger-than-expected economic data, dovish communications from several central banks alongside tame inflation outcomes in Europe and Asia. Putting this a little differently, the supply side shocks that drove inflation sharply higher in recent years may now be unwinding more quickly than had been expected. But there could equally – although far more contentiously – be greater optimism among investors that technological innovations (e.g. in Artificial Intelligence) are ramping up productivity growth.
Some of our charts this week offer some fresh perspective on this soft landing narrative. We look, for instance, at the decoupling that’s unfolded between global equity markets and broad measures of the money supply (in chart 1). We then review this week’s data for US durable goods orders and the specific evidence they reveal for still-solid US capital spending activity (chart 2). Additionally, we examine a recent survey from the euro area that indicates a slight decrease in consumer inflation expectations (chart 3). We next investigate evidence from last week's flash PMI surveys, which suggests that supply chain bottlenecks in Europe might be easing. Lastly, and turning to Asia, we assess the renewed interest from overseas investors in the region's equity markets (chart 5) and consider one of the structural factors behind this interest namely the potential for catch-up growth in India's economy (chart 6).
by:Andrew Cates
|in:Economy in Brief
- Growth accelerates as domestic final demand growth is lifted.
- Inventory & foreign trade contributions are lessened.
- Halving of Q3 price gain remains in place.
by:Tom Moeller
|in:Economy in Brief
USA| Mar 28 2024U.S. Pending Home Sales Improve Moderately in February
- Modest increase follows sharp decline.
- Regional changes are mixed.
by:Tom Moeller
|in:Economy in Brief
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