24th June 2014 Manufacturing Data Review
This week has seen the release of global manufacturing data which implies that the global economy is in good stead and performing well for 2014.
Data out of China based on HSBC's Manufacturing PMI earlier this week saw an increase form May's 49.4, to a 50.8 for June. Any figure over 50 is seen as expansion and as the HSBC index looks at smaller factory output, does in some way show that the stimulus implemented by the local government has been reaching down to the smaller businesses. Since the beginning of the year the government has added additional programs to its stimulus, such as tax breaks for SME's, pledges to speed up improvements to infrastructure in several regions and a range of banking regulations aimed at speeding up lending and clearing up their financial services sector. Although they have revised their GDP growth target for 2014 from 7.7% to 7.5% there is still concern that foreign demand may not be as strong as in previous years.
In Japan, the third largest economy has seen the first growth in manufacturing for 3 months. A PMI score of 51.1 helped the markets to marginal gains on Tuesday. The Japanese Prime Minister, Shinzo Abe is expected to give further details on his planned Third Arrow stimulus package which includes phased corporate tax cuts and reforms to state pensions. The Nikkei has been fairly stable so far this year and although it is sensitive to the US markets, and thus has been on a good run so far, should the Japanese government not address the shortfall in exports that it is seeing the economy in Japan could see further set-backs.
Whilst Global manufacturing is increasing, the same cannot be said for all of Europe. For the region, manufacturing PMI dropped in June. A score of 52.8 for June was substantially lower than May's 53.5 and was notably pulled down by France's contraction. Germany, Europe's largest economy also fell, yet remained in expansion territory with 54.2 as opposed to Frances 48.0, its lowest since February. Despite this, the Eurozone is still seen to expand in the 2nd quarter of 2014. For the region, expansion of 0.4% is expected, with Germany seeing 0.7% and France seeing a negative growth should the situation not rectify itself. It is fair to note however that manufacturing and services output for the EU has grown for the last 12 months consecutively.
The US continues to expand with its highest manufacturing PMI score in 4 years. With 57.5 seen for June the US continues to show that its economy has recovered. Whilst its markets are breaking record highs almost on a daily basis, economic indicators keep backing up the fact that things are better in the US. Even housing is getting back on track with its biggest gain in existing housing sales since August 2011. Existing homes sales were up 4.9% in May, signifying a return for the slump seen of late and well above the forecast of just 2.2%. The Federal Reserve has been consistent with its reduction in assets buying and continues to imply that rates will increase sometime in the 2nd half of 2015. With this and the support on the markets it is hard to see where the bull run will end in the US.
Major Indexes as of 24th June:
Index % Change Close/
DOW Jones (-0.06%) 16,937.26
FTSE 100 (-0.36%)
CAC 40 (-0.57%)
Nikkei 225 (+0.05%)
Hang Seng (+0.36%)
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