Thursday, April 23, 2009

Eurozone PMI Rebounds In March

Eurozone manufacturing and services sectors continued to contract in April, but the rate of decline continued to slow, according to the latest flash readings from the monthly surveys of purchasing managers. The preliminary Markit euro-zone PMI rose to 40.5 from a reading of 38.3 in March, a six-month high. The April services PMI rose to 43.1 from 40.9 in March, exceeding forecasts for a reading of 41.2. April manufacturing PMI rose to 43.1 from 33.9 in March, while expectations were for a reading of 41.2. A figure of less than 50 means a majority of purchasing managers saw a drop in activity, while a reading of more than 50 signals expansion.





Germany

Activity in German manufacturers and service sector firms dropped for an eighth straight month in April, athough the pace of the downturn was the weakest since last November. The flash estimate of the Markit composite purchasing managers' index rose to 39.7 in April from 38.3 in March.

"There's been a slight improvement in Germany but it's still underperforming
compared to other euro zone members," said Chris Williamson, chief economist at
Markit.

Despite the fact that some recent short term indicators have suggested a slight easing in Germany's contraction, the economy is still expected to suffer an unprecedented contraction of five percent or more this year. The Mannheim-based ZEW institute reported this week that its monthly gauge of analyst sentiment rose to its highest level in nearly two years in April, and this has lead some economists to start predicting the German recession may end in the autumn.




Finance Minister Peer Steinbrueck appears to be much more realistic, pointing out that the economy could shrink by more than five percent this year, with some observers even suggesting a seven percent contraction may not be out of the question. Speaking in Berlin earlier this week Steinbrück said the country’s dismal economic performance in the past six months had made “a five before the comma not unlikely”. When speaking of the recent "dismal economic performance" he was presumeably thinking about first quarter 2009 GDP data which is due for a preliminary release next Wednesday. While Steinbrück was saying the “downward dynamic is not letting up”, Karl-Theodor zu Guttenberg, Anrea Merkel's economics minister, was more equivocal: “while we may not reach the bottom this year, we may come to a point where we can see the bottom”, he said. It depends how dirty the water is at those depths, I suppose.

Manufacturing industry has been especially hard hit in Germany, and the latest PMI showed the sector was still well in negative territory. April's manufacturing index rose slightly to 35.0 from 32.4 in March. However, in a vague sign of some slight improvement the new orders index rose to its highest level since October, and was up at 36.4 from 28.9 in March.



The composite PMI employment index fell to a new series record low of 40.8. The services sector index rose to 43.5 from 42.3, showing that, not surprisingly, most of the weight of the recession is currently being borne by the manufacturing sector.

"There's quite a long way to go yet before the labour market sees any stability. I think a protracted period of falling employment is on the cards," Markit Economics representative Chris Williamson said in his comments on the report.





And a sombre note was also added by Germany's leading economic institutes who forecast this week that the economy would shrink 6 percent this year, offering us the perspective of what looks set to be the country's worst economic performance since World War II. The institutes also suggest the German economy will stay in recession until at least mid-2010. An anticipated 23 percent decline in exports this year will prevent recovery, pushing Germany’s jobless rate to an anticipated 10.8 percent next year and lifting the budget deficit to nearly twice the European Union limit, according to their half-yearly forecast. Indeed the institutes suggest German GDP, which grew by 1.3 percent last year, may need until 2013 to return to the 2008 level.

France


The pace of decline in French private sector activity also moderated further in April, and the flash estimate of the Markit/CDAF composite purchasing managers' index rose for the second straight month to 43.5 in April after hitting 41.4 in March. Again this was the highest level in six months. The PMI for the manufacturing sector jumped to 40.0 in April from 36.5 in March, while the headline measure for the services sector rose to 46.2 from a March reading of 43.6.



New orders or business continued to decline in both segments of the economy, but at a slower pace than in March, offering hope that demand may be starting to stabilise. The business expectations index in the services sector was also up, jumping to 59.1 from 51.9 in March.



Some economists are now suggesting that the French downturn may have bottomed out in the first quarter of 2009, although the national statistice institute (INSEE) estimates GDP may have fallen by about 1.5 percent quarter on quarter, the sharpest contraction since 1975. So all of this is now a very hard question to call, although it may well be that France's contraction will moderate in the second and third quarters since the French economy is not export dependent and French consumers are not as heavily indebted as they are in some other Eurozone countries like Spain and Ireland.

That being said, Markit did sound a note of caution over April's PMI data, stressing that rising unemployment poses a substantial downside threat to any early recovery. April's composite employment index stood at 39.5 as the pace of job shedding in the private sector remained close to February's series record low of 39.2. "While the intensity of falls in activity and new business may have moderated, the danger now is of a protracted period of heavy job losses, which will drag on demand and enfeeble any recovery," according to the Markit statement.

However French manufacturers’ confidence did rise in April rose for the first time in 13 months, suggesting the easing in the slump in manufacturing may be having a positive effect on sentiment. The index, based on a sample of 4,000 manufacturers rose to 71, from 68 in March. The March reading had been the lowest since the series started in June 1962, so it would be very premature to start jumping to too many conclusions.



So all this needs to be kept very much in perspective. The Organization for Economic Cooperation and Development projects French unemployment to rise this year to almost 10 percent from 8.2 percent, while The International Monetary Fund estimate joblessness will reach 9.6 percent this year and that the French economy will contract by 3 percent.

Sunday, April 12, 2009

Slovenia's Contraction Continues

Slovenia’s economic contraction continues to bite, and industrial output fell the most in at least six years in February as the worsening European recession continued to hit demand for exports. Annual output declined 22.3 percent, the fifth consecutive month that it dropped, from a 17.4 percent decrease in January. Month on month, production fell 0.9 percent.





Slovenia, like many East European economies is far more dependent on European markets like Germany than on local government stimulus measures. Slovenia’s export-driven economy is sliding deeper into recession as demand whithers across the 27-nation European Union. Gross domestic product in the Adriatic nation is set to shrink 4 percent this year according to the government’s forecasting institute.

Slovenia’s economy contracted for the first time in more than 15 years in the fourth quarter of 2008, and is almost certainly heading for quite a deep recession as a construction boom came to an end while demand dropped for exports to other economies in the European Union. Gross domestic product shrank 0.8 percent year on year following a revised 3.9 percent expansion in the previous quarter. More astonishingly, quarter on quarter GDP contracted a seasonally adjusted 4.1 percent. Only Estonia and Latvia contracted at a faster rate.




Prime Minister Borut Pahor has introduced subsidies for shorter working hours to help exporters and set up a 12 billion-euro state-guarantee plan to restart bank lending. The outlook for the coming months is “bleak” since all economic indicators have fallen to their lowest level on record, according to the government forecasting institute.

Exports were down again sharply in February 2009, with goods worth EUR 1,266.1 million leaving the country and goods worth EUR 1,324.5 million entering, which means that exports were 25.1% lower than in February 2008, while imports decreased by 29.1%, and the country ran a trade deficit of 58.5 million euros.

Friday, April 03, 2009

Spain's Unemployment Continues Its Sharp Upward Surge

The number of unemployed in Spain was up again in March - by "only" 123,543. I say "only" since it is evidently less than the 154,508 increase registered in February, or the 198,538 registered in January. And indeed many of the newspaper stories have been full of arguments from Employment Minister Maravillas Rojo (would that she could work "Maravillas") about how Spain registered the weakest unemployment gain in six months in March (when compared to the previous month). However, as those who look into the economic analysis side of this a bit more (and who don't believe in either wonders or "miracles) point out, taking seasonal factors into account the monthly 3.55% rise in March shows a more or less steady trend, and no special sign of improvement, despite the large stimulus programme. Last March, for example, unemployment fell by 0.62%.

So when we come to look at the year on year situation (which more or less eliminates the seasonal variation) we find that the year on year rate of increase of 56.69% was the highest so far, and if we look at the chart we will see there is no sign of a softening in the curve.




So the overall jobless total rose to 3,605,402 the highest since 1996, and the 3.5 percent or 123,543 March increase was the highest number since 1996 when the current method of calculation was introduced, according to the ministry statement. This was the 12th straight monthly increase and the sixth consecutive montly rise of more than 100,000 registered unemployed in Spain.

Which brings us to the forecast. Basically we could now take two scenarios, a moderate and a worse case one. On the moderate scenario, total unemployment will now hit 4.5 million by December, and 6 million by December 2010. On the worst case scenario we will already be at 5 million by christmas, and be pushing 7 million by the end of 2010. It all depends.

In terms of unemployment rate, the latest quarterly estimate we have from the national statistics agency (INE) was 13.9 percent for the fourth quarter of 2008. However according to European Union statistics agency Eurostat, Spain's unemployment rate rose to 15.5 percent in February, the highest level in the whole 27-nation bloc. (The EU average was 7.9 percent). Spain's unemployment rate has now risen each quarter since it dipped to 7.95 percent in the second quarter of 2007, its lowest level since 1978. The government currently expects unemployment to rise to 15.9 percent by the end of the year, but this is obviously hopelessly unrealistic, since we are nearly at that level now, and even the European Commission, which is normally fairly conservative with downside estimates, is more pessimistic, since it forecasts Spain's jobless rate continuing to rise in Spain to 16.1 percent in 2010 and 18.7 percent in 2011.


My own forcasts would be on the moderate forecast around 20% by the end of 2009 and 25% by end 2010, and on the worst case scenario possibly 22% by the end of this year, and 27% to 30% by the end of 2010. These latter numbers look horrific, and seem hard to believe, but we are currently set on a path (especially now with the "breakages" in the banking system - today there is growing and informed specultion here in Catalonia that Caixa Penedes, and Caixa Catalunya may be the next to go) where it is hard to see how we won't get to that horrible place if no one does anything. And since at this moment the entire European leadership seems to be in denial that there is any special problem in Spain nothing looks likely to be done. (Jean Claude Trichet simply said what he had to to the Spanish journalist who questioned him on the Spanish banking system in yesterdays press conference - "I have every confidence in the strength of the Spanish banking system). Even that G20 meeting that is hitting the headlines seems to have had little to offer for countries like Spain, there were plenty of ideas about how to avoid falling into another bubble situation in - say - 2020, but virtually none about how to drag us out of the one we are currently stuck in.




Consumer Confidence Rebounds Slightly


Due you believe in the "earthquake" theory of probability? You know, the one which goes that if you didn't have an earthquake yesterday, and you didn't have an earthquake today, then the probability of having one today must be higher, right? Well something like this seems to be the theory of probability that Spanish consumers inherently believe in.

Why? Because Spanish consumer confidence rose again this month, to 53.7 points, up from 48.6 points in February, The Confidence Index which is provided by Spain's Official Credit Institute (ICO ) was at 73.1 in March last year, hit a record low of 46.3 in July as oil prices soared and European Central Bank interest rates hit 4.25 percent, and has since oscillated around the 50 point level amid easing commodity prices and following ECB decisions to sharply reduce interets rates.





But if we look at the breakdown in the individual components, we will see that the current conditions, employment and state of the country readings have long been trawling the bottom. The only component which gas really not hit lows (yet) is the expectations one. The Spanish are ever optimistic (until they get really pessimistic that is) and this component has been rising in recent months, even as conditions have continued to deteriorate. Which is why I say they must believe something like the "earthquake" theory of probability, the more days that pass with things getting worse must mean that tomorrow they are likely to get better, right?



Industrial Contraction Continues Unabated

The JPMorgan Global Manufacturing PMI – which provides a single figure snapshot of operating conditions across the planet – was out earlier this week and posted 37.2 in March. Although substantially below the no-change mark of 50.0, the PMI was up for the third month in row and at its highest level since last October. The vast majority of the national manufacturing PMIs rose in March, including the US, Russia, Japan, China, most Eurozone nations and the UK.

This is however the most sustained period of contraction in the series history, and it still remains very unclear where we go from here. In general the drop in output reflects weak demand, with new orders declining for the twelfth month in a row. The trouble is, it is not at all clear where the rebound in demand that is needed for a recovery is actually going to come from.

The Markit Eurozone Final Manufacturing PMI for March rose from February's all-time low, up to 33.9 from 33.5. Thus the PMI signalled a marginal easing in the rate of decline from the previous month's record pace. Output showed the weakest decline for five months, and a smaller fall than the Flash estimate, although the rate of decline remained well above that seen prior to last October. With the exception of Italy, Austria and Greece, rates of contraction eased in each of the eight countries surveyed.

The Netherlands saw the smallest (though still steep) drop in production, while Spain saw the sharpest decline for the eleventh straight month. By product, investment goods producers reported the steepest fall in production for the third successive month, closely followed by intermediate goods producers. Consumer goods firms meanwhile reported the weakest rate of decline for the seventh consecutive month. Stocks of both raw materials and finished goods fell at record rates, as companies focused on lowering their operating capacity and controlling costs. The reduction in unsold goods stock was especially steep in Ireland, Germany and France.


Spain

The pace of decline in Spanish manufacturing slowed in March but remained at the steepest contraction rate of any eurozone country. The PMI rose in March to 32.9 from 31.8 in February and thus further off from December's record low of 28.5. All the survey's main indicators remain far below the 50 level that divides growth from contraction. Output and new orders continued to contract sharply in March but at slower rates than recorded in the last six months, with panellists blaming falling demand as the principal cause as clients cut back on spending.

"The March PMI data suggests that the pace of decline in the Spanish manufacturing sector has slowed," said economist Andrew Harker at Markit Economics, adding that new orders and output indices are well above record lows posted late last year.

But Harker was at pains to stress that the March figures should not be interpreted as any sort of sign of a turnaround in the Spanish economy. Unemployment in the sector continued to rise in line with falling output requirements as joblessness in the wider Spanish economy stood at 15 percent, the highest rate in the European Union. More than 34 percent of those surveyed by Markit said they had noted reduced employment levels at the end of the first quarter. Staffing levels have shrunken continuously since September 2007, according to the survey.

Slumping demand also hit input and output costs, which both dropped to series lows in March. Input costs fell as firms negotiated better prices from suppliers, while output prices fell as these savings were passed on to customers and as scarce business fuelled greater pricing competition.

Spain's preliminary harmonised inflation fell to -0.1 percent in March, according to government data on Monday, the first negative result for over 45 years as the deepening recession weighed on price gains.

Thursday, April 02, 2009

JPMorgan March Global PMI Report Shows (Slightly) Slowing Contraction

Data from the JPMorgan March Global PMI provide solid evidence that the speed of contraction in global manufacturing is lessening at the present time. Indexes tracking trends in output and new orders generally continued to rise across the globe, and are in general now up significantly from the series lows registered at the end of 2008. However, both the output and the new orders indexes remained at very low levels, all still signalling continuing contraction and well below those consistent with anything resembling a recovery in either component.

The JPMorgan Global Manufacturing PMI – which provides a single figure snapshot of operating conditions across the planet – posted 37.2 in March. Although substantially below the no-change mark of 50.0, the PMI was up for the third month in row and at its highest level since last October. The vast majority of the national manufacturing PMIs rose in March, including the US, Russia, Japan, China, most Eurozone nations and the UK.

This is however the most sustained period of contraction in the series history, and it still remains very unclear where we go from here. In general the drop in output reflects weak demand, with new orders declining for the twelfth month in a row. The trouble is, it is not at all clear where the rebound in demand that is needed for a recovery is actually going to come from.

Only last week the World Trade Organisation forecast a drop of 9% in the volume of international trade in 2009, and it is clear that in most economies output volumes continue to be hit by global as well as by local factors. That is what globalisation means, in effect, we are all interlocked.The rate of contraction in new export orders was severe, and in line with that seen for total order books.

When assesing the present situation, I think we need to keep three factors in mind: employment, inventories, and the massive stimulus packages which are being implemented.

On the employment front, the March data pointed to further job losses, as staffing levels were cut for the eleventh successive month, pointing to weakening consumer demand further along the road. The rate of decline moderated but remained historically high. All of the national manufacturing surveys for which March data were available reported reductions in employment. Denmark, the US and Czech Republic registered the fastest rates of decline.

As far as stocks go Global manufacturers continued to unwind their inventory positions in March. Stocks of purchases declined at the fastest pace in the series history. Among the national manufacturing sectors covered, only India reported a gain in input inventories. Even here, the rate of growth was marginal. So one of the reasons why output levels may bounce back slighly in the next few months is that inventory levels must now be quite low in many cases, and to some extent new orders will need to be met from production rather than from stocks. In addition, we are in the middle of the stimulus programmes, and it would be surprising if we didn't see some impact on manufacturing output from all that money being spent. Another question altogether would be whether any of this spending is capable of gaining traction. With consumers all over the developed world battening down the hatches for a long winter, and saving as hard as they can to put some order back in their balance sheets, it would be surprising if the stimulus packages on the scale we are seeing them were actually sufficient to turn all this round at this point. So the outlook is, a few months of easing in the contraction, and then more of the same.



Europe


Sweden

Sweden's seasonally adjusted manufacturing purchasing managers' index rose to 36.7 in March from 33.9 in February, but the index remained below the threshold level for the ninth consecutive month in March, although this was the third consecutive month of improvement. In March, the production index rose to 38.8 from 34, while new orders index moved up to 35.1 from 28.8. The employment index increased to 31.1 from 30.1 and the inventories index rose 3 points to 39.6. Meanwhile, the prices index fell to 27.7 from 30.4.





Eurozone

The Markit Eurozone Final Manufacturing PMI for March rose from February's all-time low, up to 33.9 from 33.5. Thus the PMI signalled a marginal easing in the rate of decline from the previous month's record pace. Output showed the weakest decline for five months, and a smaller fall than the Flash estimate, although the rate of decline remained well above that seen prior to last October. With the exception of Italy, Austria and Greece, rates of contraction eased in each of the eight countries surveyed.

The Netherlands saw the smallest (though still steep) drop in production, while Spain saw the sharpest decline for the eleventh straight month. By product, investment goods producers reported the steepest fall in production for the third successive month, closely followed by intermediate goods producers. Consumer goods firms meanwhile reported the weakest rate of decline for the seventh consecutive month. Stocks of both raw materials and finished goods fell at record rates, as companies focused on lowering their operating capacity and controlling costs. The reduction in unsold goods stock was especially steep in Ireland, Germany and France.


Germany

Declines in German manufacturing activity continued to slow in March, however, activity in the sector continues to contract at a sharp pace, the research firm added.

The German manufacturing purchasing managers index rose to 32.4 in March, up one point from February's figure and in line with both preliminary estimates and expectations. March's increase marks the second consecutive month of improvement after PMI reached a 12-year low in January of 32.0. Nevertheless, the figure remains well in contraction territory, with the average taken across Q1 as a whole notably lower than the previous quarter's figure. According to the PMI report, manufacturing output and new orders continued to contract, albeit at a reduced pace, while employment fell at a record pace over the month. "The sector's performance in Q1 was at least as bad as Q4 and therefore points to another heavy fall in GDP," Markit senior economist Paul Smith said.



Spain

The pace of decline in Spanish manufacturing slowed in March but remained at the steepest contraction rate of any eurozone country. The PMI rose in March to 32.9 from 31.8 in February and thus further off from December's record low of 28.5. All the survey's main indicators remain far below the 50 level that divides growth from contraction. Output and new orders continued to contract sharply in March but at slower rates than recorded in the last six months, with panellists blaming falling demand as the principal cause as clients cut back on spending.

"The March PMI data suggests that the pace of decline in the Spanish
manufacturing sector has slowed," said economist Andrew Harker at Markit
Economics, adding that new orders and output indices are well above record lows
posted late last year.

But Harker was at pains to stress that the March figures should not be interpreted as any sort of sign of a turnaround in the Spanish economy. Unemployment in the sector continued to rise in line with falling output requirements as joblessness in the wider Spanish economy stood at 15 percent, the highest rate in the European Union. More than 34 percent of those surveyed by Markit said they had noted reduced employment levels at the end of the first quarter. Staffing levels have shrunken continuously since September 2007, according to the survey.

Slumping demand also hit input and output costs, which both dropped to series lows in March. Input costs fell as firms negotiated better prices from suppliers, while output prices fell as these savings were passed on to customers and as scarce business fuelled greater pricing competition.

Spain's preliminary harmonised inflation fell to -0.1 percent in March, according to government data on Monday, the first negative result for over 45 years as the deepening recession weighed on price gains.


Italy

Italy once again goes against the stream, since manufacturing activity fell in Italy at its fastest pace on record in March, with the manufacturing purchasing managers index falling to a record low of 34.6, down from February's 35.0 and suggesting an unprecedented contraction in activity for the sector. Weakness was widespread, Markit said in their report. Staffing levels were cut at a record pace as firms were forced to adapt to falling workloads and declining new orders. Backlogs of work also declined at their sharpest pace in the history of the PMI as falling demand meant firms to were increasingly able to complete outstanding projects.


France

French manufacturing output fell at a slower pace in March than in February, but but the outlook remained highly fragile as demand continued to suffer and firms stepped up job cuts. The Markit/CDAF manufacturing purchasing managers' index came in at 36.5 , well still below the 50 mark separating growth from contraction. The reading was, however, better than the record series low of 34.8 seen in February.

"Although output and new orders fell at slower rates in March, the latest PMI
data still point to severe weakness in the French manufacturing sector as the
slump in demand continues," said Jack Kennedy, an economist with Markit
Economics.

Again, in a picture we get from one country after another, there was a sharp fall in inventories of finished goods. This suggests the overhang of unsold stock is diminishing, and once the destocking phase is complete, falls in production should ease for a bit, although I doubt such upticks will be enough to retart the economy given the depth of the current recession/depression. On the investment side, it was notable that those taking part in the survey said consumers and businesses were reluctant to commit to new spending.

The new orders index hit 34.3 in March from 30.1 in February, but remained deep in negative territory, marking its 10th consecutive month of contraction, according to the survey. Faced with dwindling levels of new business, firms worked through backlogs at a rapid pace, and slashed jobs to trim excess capacity, pushing the factory employment index to its second-lowest level in the series history, at 36.2.


Greece

The Greek Purchasing Managers’ Index fell to a new record low of 38.2 in March, reflecting a sharp drop in production, new orders, employment and inventories during the month. The markit economics monthly report said factory prices fell more rapidly in March, while import prices fell at a slower rate, a sign of further pressure in companies’ profits. The employment rate in the Greek manufacturing sector fell to a record low in the same month.



Eastern Europe


Hungary

Hungary's manufacturing purchasing manager index eased by 0.2 percentage points to 39.5 in March picking up from an all-time low in February, according to the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM). The contraction of the manufacturing sector that started last October has continued, and its rate has even increased as compared to February.



Poland

In Poland, the index rose to 42.2 points, the highest in five months, from 40.8 in February. The decline in Polish industry decelerated for the third month in a row and was the least weakest rate since November. Markit said both new orders overall and new export orders continued to contract rapidly, reflecting weakening demand from western Europe, while employment fell to a new record low for the fastest rate of decline since the survey began in July 2001.

Roderick Ngotho, a strategist at UBS, pointed to German PMI data also released on Wednesday, which he said did not reflect a collapse in Germany factory orders and it was possible sentiment was "adapting to bad news". "Hence though still quite poor, it could be looking for a base in the poor side of the scale. This is different from sentiment being outright optimistic due to a positive change in global macro indicators," he said. "Without global demand picking up and with domestic demand generally weak, it is difficult to envisage a positive environment for industrial orders/output to pick up meaningfully in the near term."
The Czech Republic

The Czech Purchasing Managers' Index inched up to 34.0 in March from 32.6 in February and from the record low set in January. The Czech decline was also the least extreme in five months, but the first quarter as a whole still pointed to a much steeper rate of decline than the second half of 2008, said Markit, which compiles the PMIs.

The slower rate of contraction in March could, of course, be linked to the effects of the car-scrapping subsidies introduced in some 10 EU countries in January. Carmakers are the main drivers of economies like those in the Czech Republic and Slovakia, where leading global manufacturers have set up factories this decade. Both countries have seen their sharp declines in output ease in recent weeks. Some firms, including the Volkswagen unit Skoda, have recently hired additional workers and resumed full working weeks to handle the resulting surge in orders, the problem for these economies is that the subsidy effect may only last for several months.



Russia

Russian manufacturing contracted at the slowest pace for five months in March as companies reduced their stocks of unsold goods and the decline in new business eased, according to the latest PMI report from VTB Capital. The VTB Purchasing Managers’ Index was at 42 last month after a 40.6 reading in February. Stockpiles of unsold goods fell at the fastest rate since December 2005.



“Stocks of unsold goods declined which, combined with a sluggish contraction of the new business sub-index, suggest that the headline index may keep rising into the second quarter,” Dmitri Fedotkin, a VTB economist, said in the statement. Still, “no sharp recovery” in the index is to be expected.
The index showed contraction for the eighth straight month, a longer period of decline than the one registered in 1998, when the government devalued the ruble and defaulted on $40 billion of debt.

The manufacturing workforce shed jobs for the 11th month in a row, the longest period of contraction in the survey’s history, VTB said. “Firms reported that the redundancies resulted from lower workloads and the subsequent need to cut spare capacity,” it said in the statement.

Asia


China

China’s manufacturing industry shrank for an eighth straight month in March as collapsing global trade cut exports and growth across Asia. The CLSA China Purchasing Managers’ Index dropped to a seasonally adjusted 44.8 last month from 45.1 in February. So again, while the stimulus programme is slowing the rate of contraction, there is no sign of any expansion in China.




The manufacturing component of the index continued to increase, rising for a fourth month from a record low of 40.9 in November. The export orders index rose to 41.4 from 39.5 in February. New orders climbed to 43.6 from 44.2. Output gained to 44.3 from 43.9, while the employment index rose to 47.1 from 46.6, its second increase in eight months.

“A worsening of domestic manufacturing orders lies behind the drop in the PMI and accords with what we are seeing on the ground in the steel industry,” said Eric Fishwick, head of economic research at CLSA in Hong Kong. “Expect the production index to show softness in April......More encouragingly, export orders continue to improve,” he added “They are still falling but at the most moderate pace since October.”

India

Indian manufacturing activity contracted for a fifth straight month in March as demand remained depressed by the global economic downturn, although there were some signs of improvement, according to the report which accompanied the ABN AMRO Bank purchasing managers' index. The index rose to a seasonally adjusted 49.5 in February from January's 47.0, indicating slight signs of slight improvement after hitting a 44.4 trough in December, getting now very close to the reading of over 50 which signals economic expansion. "On the whole, it appears that business conditions in the manufacturing sector are gradually improving," said Gaurav Kapur, senior economist at ABN Amro Bank. Perhaps India's is the only manufacturing sector in the global economy which gives some indication of moving out of contraction and into recovery at this point.

Manufacturing, however, currently only makes up about 16 percent of India's gross domestic product. "It appears that domestic demand is picking up," Kapur said. "External demand, however, remains weak and contracted in March too, for the sixth consecutive month." The new orders index rose to 49.5 from 45.9 in February.

Americas

United States

Manufacturing in the U.S. contracted for a 14th straight month in March as factories kept on cutting production, though a spike in new orders and the lowest inventories since 1982 indicate the industry may be stabilizing to some extent, whether in the short term or the longer term remains to be seen. The Institute for Supply Management’s factory index rose to 36.3 last month from 35.8 in February. Still, the contraction is very pronounced at this point.



The ISM’s gauge of inventories fell to 32.2, the lowest since August 1982, from 37 in February. Even as manufacturers are pushing their inventory levels down ISM representatives stressed “we’re probably two, three months away from seeing significant improvement in new orders that would be driven by customer inventories coming in line.”

Brazil

March data pointed to yet another weak performance of Brazil’s manufacturing economy despite the fact that the headline seasonally adjusted Banco Santander Purchasing Managers’ Index registered its highest reading since last October (42.2). Despite a slower contraction in output being recorded in March, the pace of decline remained substantial. The trend in production closely followed that of new orders, although another severe depletion in unfinished work prevented it from falling as severely. Stocks of finished goods were also lower than in February, and the latest data are consistent with a modest reduction in inventory holdings, with manufacturers frequently responding that orders had been met directly from existing stocks.

Input and output prices fell at series record rates during March. The drop in purchasing costs was only the second in the survey history, and reflected weak global demand for fuel and raw materials. Manufacturers passed these reductions on to customers, by way of lower charges, in an effort to remain competitive in a difficult market environment