Friday, January 2, 2009

More On Charts

China’s manufacturing contracted for a fifth month in December as recessions in the U.S., Europe and Japan sapped demand for exports, a survey showed. The CLSA China Purchasing Managers’ Index stood at a seasonally adjusted 41.2, compared with a record low of 40.9 in November. A reading below 50 reflects a contraction.

“Chinese manufacturing was very weak in December,” said Eric Fishwick, head of economic research at CLSA in Singapore. “With five back-to-back PMIs signaling contraction, the manufacturing sector, which accounts for 43 percent of the Chinese economy, is close to technical recession.”

The output index fell to a record low of 38.6 last month from 39.2 in November, while the measure of new orders rose to 37 from 36.1. The index of export orders jumped to 33.6 from 28.2, CLSA said.

Chinese manufacturers reduced the size of their workforces at the fastest rate recorded by the series to date, according to the report report. An employment index tracked by CLSA has contracted for five consecutive months to 45.2 in December.

Central Europe

The Czech Purchasing Managers' Index dropped to 32.7 in December, from 37.8 in November, falling below the critical 50.0 mark for the sixth consecutive month, according to the latest report from Markit Economics and ABN Amro. Czech output dropped to a new historic low of 27.4 for the fastest contraction in any period since the survey began in July, 2001. Markit said the overall decline in business conditions was the worst in the survey's history, and anecdotal evidence linked it to worsening domestic and export demand. I think I now have a recession call out on the CR, either they will have the first of two consecutive quarters of contraction in Q4 2008, or in Q1 2009. This is very sharp, and quite dramatic. Country specific post to come as and when I get the time.

Poland's dropped to 38.3 in December from 40.5 in November, this is its lowest level since the series began in June 1998 and the eighth month running of contraction in the sector. Recession is coming in Poland, I just wouldn't like to say at this point (without going over the data more thoroughly) when. The downturn in manufacturing is slower at this point than in the CR, which most probably means domestic demand was more robust, but that's just a guess.

New business indicators dropped at the fastest rate in survey history in December, with the new orders index falling to 32.2 in December from 35.6 in November, and new export orders decreasing to 31.4 from 40.1. December's total manufacturing output index fell for the seventh straight month, to 36.3 from 40.2 in November, while industrial companies cut employment for the eight consecutive month since May, with the December employment index dropping to 40.7 from 42.4 in November.


Russian manufacturing shrank at a record pace in December as slumping foreign and domestic demand led to production and jobs cuts, VTB Bank Europe said.

VTB’s Purchasing Managers’ Index contracted for a fifth month to 33.8, from 39.8 in November, the bank said in an e-mailed statement today. That is lower than at any time during the 1998 economic collapse, when the government dropped its support of the ruble and defaulted on $40 billion of domestic debt. A figure above 50 means growth, below 50 a contraction. The bank surveyed 300 purchasing executives.

A 72 percent drop in the RTS Index made it the worst stock index among the world’s 20 biggest equity markets in 2008 and gave investors in the country their biggest losses since Russia defaulted on its debt 10 years ago.

The ruble lost 15 percent against the dollar-euro currency basket in 2008, weakening the most since the measure’s introduction in 2005. The ruble fell 16 percent against the dollar, the currency’s worst performance since 1999 as the economy was battered by a 75 percent plunge in oil.

The central bank used 27 percent of its foreign-currency reserves, the world’s third-largest, to prop up the ruble. Reserves fell to $438.2 billion. More than $200 billion has left the country’s economy and currency since August, according to BNP Paribas SA.

Indian Manufacturing Contracts

There was neither respite or reprieve for the Indian manufacturing sector in December, and the PMI survey continued to show falling output and new order levels following the initial contraction registered in November. Having said that, India is still faring significantly better than most. Nevertheless the headline ABN AMRO Purchasing Managers’ Index fell for the fourth consecutive month to give a new low of 44.4, and register the second month of contraction.

Although new order levels were down considerably for both the domestic and export sectors, the accelerated fall in new export orders since November was far stronger. Thus, as might be expected, internal demand in India is proving to be a little more robust than it is in China.


The headline seasonally adjusted Banco Real Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of the performance of the manufacturing economy – dropped to a new low of 40.0 in December, pointing to a sharp deterioration in the health of the sector. The PMI has now registered below the no-change mark of 50.0 for three consecutive months.


December’s seasonally adjusted Nomura/JMMA Japan Manufacturing Purchasing Managers’ Index remained below the critical 50.0 no-change mark for a 10th successive month in December to signal a further deterioration of operating conditions in the Japanese manufacturing sector. Moreover, the headline index posted its lowest level in the survey history, recording 30.8, down sharply from 36.7 in November.

Japanese manufacturing production declined at by far the steepest rate in the survey history in December. Falling output levels have now been registered for 10 consecutive months. The latest contraction generally reflected rapidly declining new order volumes and extremely adverse market conditions.

Volumes of new orders received by Japanese manufacturers fell at the most marked rate recorded by the series to date. Panelists cited a sharp reduction in client demand as the principal contributor to the latest contraction. In line with rapid declines in both new business and output, volumes of new export orders contracted at the sharpest rate since the inception of the series in October 2001. Anecdotal evidence attributed lower export receipts to severe reductions in overseas demand, reflecting the deteriorating health of the global economic environment.

In December, average input prices fell for the first time since September 2003. This was in sharp contrast to the strong rates of inflation recorded throughput much of 2008 so far. There were widespread reports that a number of raw materials had fallen in price, while several panelists linked lower input costs to stagnant market conditions.


The Spanish manufacturing sector shrank at a record pace for the fourth month running in December due to a lack of new business as the country entered recession, the Markit Purchasing Managers Index showed on Friday. The indicator fell to 28.5 from a previous low of 29.4 in November and marked the lowest level in the near 11-year history of the survey.

Around 43 percent of Spanish manufacturers in the PMI survey said they cut jobs in December to compensate for falling production, marking the highest level of layoffs in the series history and taking the employment indicator to a low of 29.4.
"The truly horrendous PMI data for December mean that Spanish manufacturing heads into the new year with little reason for optimism - 2009 is all set to be a very difficult year," said Markit economist Andrew Harker.

December PMI data showed the second steepest contractions on record for new domestic and foreign orders, with cancellations from the United Kingdom, France and Germany
Jobs have now been cut in the Spanish manufacturing sector for 16 consecutive months.


Italian manufacturing activity contracted sharply in December for the 10th month running, though at a marginally slower rate than November's series record low, the latest Markit/ADACI PMI survey showed on Friday. The Markit Purchasing Managers Index edged up to 35.5 from 34.9 in November but was still the second lowest level in the survey's 11-and-a-half year history.

Staff were shed at the fastest rate on record, with the relevant sub-index falling for the fourth consecutive month as Italy's recession-hit manufacturing sector continued to suffer from the effects of the international financial crisis.
The PMI was above expectations. The median forecast in a Reuters poll had pointed to a reading of 34.0.

"The Italian manufacturing sector remained mired in recession during December as output, new orders, new export orders, backlogs, employment and purchasing activity all contracted," Markit said. PMI has not been above the 50 mark which separates growth from contraction since February and the latest data offered no sign of recovery. Exporters were particularly hard hit by the global downturn, with new orders from abroad falling at the fastest pace since the survey began in 1997.
One glimmer of good news for the economy is the decline in inflation, though this reflects the weakness of demand as well as the drop in the price of oil and other raw materials.

The PMI showed input prices for manufacturers fell in December for the second month running, signalling the strongest rate of deflation in the survey's history.
Prices charged also posted their steepest drop on record, showing firms have little or no pricing power to pass on earlier higher costs. Most independent forecasters expect Italy's economy to contract by around 0.5 percent in 2008 and by around 1 percent this year, which would be the first consecutive years of falling GDP since World War Two


Collapsing orders sent Germany's manufacturing sector into its biggest contraction in more than 12 years in December, even though a slump in input costs allowed producers to cut their prices, a survey showed on Friday.
The headline index in the Markit Purchasing Managers' Index (PMI) for Europe's biggest economy fell to 32.7 in December from 35.7 in November. The fall took the index deeper below the 50 threshold separating contraction from expansion.
The reading, which showed a sector contraction for the fifth month running, was the lowest since the series began in April 1996 and was below a flash estimate of 33.5 released on Dec. 16. A sub-index on new orders also fell to a series record low.
"There is no doubt that the German manufacturing sector nosedived in the final three months of 2008, and the December data suggest that firms are suffering more than at any other time since reunification," said Markit economist Tim Moore.
"Rapidly falling input prices seem to be the symptom rather than the cure for manufacturers," he added.
A sub-index on input prices fell to 30.8 from 39.2 in November. The survey also showed that a drop in output prices in December was the most marked for five years.
The slump in costs chimed with other recent data showing price pressures have eased in the euro zone, where inflation plunged by 1.1 percentage points to 2.1 percent in November.
European Central Bank policymakers have said there is still room for the bank to cut interest rates, though some have talked down major cuts. Last month, the ECB slashed its main interest rate by 75 basis points to a 2-1/2 year low of 2.50 percent.
Anecdotal evidence from the PMI survey suggested that a rapid contraction of demand in the auto sector was a key factor leading to lower workloads in December, Markit said.
In November, German carmaker BMW reported a 25.4-percent drop in group vehicle sales, and rival Mercedes-Benz said sales at its cars division fell 25.2 percent.
Reflecting weaker demand, a PMI output sub-index fell to its lowest level since the series was first compiled in April 1996.


December data highlighted another dismal month for French manufacturers, as the economic climate worsened further and led to steep reductions in output and new orders. The headline Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to measure the performance of the manufacturing economy – dropped to a new series low of 34.9, from 37.3 in November and lower than the earlier flash estimate of 35.9.

Bleak conditions in the manufacturing sector reflected the ongoing slump in demand, as customers cut back on discretionary spending amid a sharp downturn in the economy and associated heightened uncertainty. The result was a further rapid contraction of new orders, with the rate of decline accelerating to a fresh survey record. While panelists reported that demand from the domestic market remained depressed, export sales were also down considerably in line with the weakening global trade environment.

Markedly lower new work led French manufacturers to lower production for a seventh consecutive month in December. Furthermore, the pace of contraction was the fastest in the series history. Nevertheless, the fall in output was insufficient to prevent a series record fall in backlogs of work. Efforts to reduce spare capacity led firms to make further cutbacks to employment in December. The latest drop in staffing levels was the eighth in successive months and the strongest registered by the survey to date.

Stocks of finished goods declined for a second straight month in December, albeit only marginally. Anecdotal evidence suggested that many firms had implemented destocking policies in line with forecasts for lower demand, although their attempts to do so were often hampered by weaker-than-expected sales.

French manufacturers also reported a fall in stocks of inputs, as they adjusted inventory levels in line with diminished expectations for future output. The latest reduction in pre-production stocks was the fifth in consecutive months and the sharpest since the inception of the survey in April 1998.

Purchasing activity was lowered substantially, alleviating pressure on suppliers and contributing to a further improvement in lead times.

Deflationary pressures were signaled on both the input and output price measures for the second month running in December. Average input costs decreased at the fastest rate since February 2002, with panelists highlighting the impact of lower prices for raw materials such as oil and metals. Meanwhile, weak demand and competitive pressures were cited as key factors underlying a solid decline in factory gate prices.

Commenting on the Markit/CDAF France Manufacturing PMI final data, Jack Kennedy, economist at Markit, said: “The French manufacturing sector ended the year in tailspin as demand continued to rapidly contract. The sharp downward trajectory in all key variables, allied to clear deflation of costs and output prices, points the way to further ECB policy rate easing.”

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