Friday, 2 December 2005

US data positive but PMIs mixed as ECB raises rates

US economic data continued to be good yesterday. Reuters reports that personal spending and income were up:

Personal spending climbed 0.2 percent in October while personal incomes rose 0.4 percent, broadly in line with Wall Street estimates, according to a Commerce Department data... The personal savings rate, the percentage Americans put away after spending, taxes and interest payments, was negative for the fifth straight month to stand at minus 0.7 in October.

...while inflation remained subdued:

The same report showed an inflation index favored by the Federal Reserve -- personal consumption expenditures excluding food and energy -- rose a tame 0.1 percent, only half the gain expected by Wall Street... [T]he year-on-year figure [was] 1.8 percent.

Manufacturing remained strong:

U.S. factories responded to robust consumer demand by ramping up activity, with the Institute for Supply Management's measure of national manufacturing dropping to 58.1 in November from 59.1. However, the figure was still above the 50 mark that points to expansion in the sector.

...and the labour situation improved:

A separate report by the Labor Department showed the number of U.S. workers making new jobless claims fell last week to below the levels they were at before huge hurricanes hit the U.S. Gulf Coast earlier this year. Initial claims for state unemployment benefits dropped 17,000 to 320,000, largely in line with Wall Street forecasts.

In Europe, manufacturing slowed in the UK but accelerated in the euro-zone, according to another Reuters report.

The Chartered Institute of Purchasing and Supply/RBS PMI index fell to 51.0 -- below the 51.9 forecast by analysts -- from a downwardly revised 51.6 in October... A comparable survey of the 12-member euro zone showed the sector expanding at the fastest pace in 14 months. The factory PMI there edged up to 52.8 from 52.7...

The increase in the euro-zone PMI perhaps makes the ECB's interest rate hike more palatable. FT reports:

The European Central Bank on Thursday lifted interest rates for the first time in five years, ignoring concerns that the quarter-point increase could stifle Europe’s fragile economic recovery.

Jean-Claude Trichet, president, said the rise to 2.25 per cent in the ECB's main interest rate was a response to inflationary pressures and would adjust the bank's "accommodative monetary policy stance".

But Mr Trichet, who had to resolve splits within the bank's policymaking governing council, made clear that a series of rate rises was not planned.

He insisted the rate rise was agreed unanimously by the 18-strong governing council, but admitted that some members had urged a half percentage point rise, while others had wanted rates to remain unchanged.

What remained unchanged was the European unemployment rate:

Euro-zone seasonally-adjusted unemployment stood at 8.3% in October 2005, the same as in September. It was 8.8% in October 2004. The EU25 unemployment rate was 8.5% in October 2005, unchanged compared to September. It was 9.0% in October 2004.

But back to manufacturing, things look worse in Australia.

The Australian Industry Group/PricewaterhouseCoopers (PwC) Australian performance of manufacturing index (PMI) fell by a seasonally adjusted 3.6 points to 44.2 in November.

In other news on Australia, FT reports on Australia's current account:

Australia's third-quarter current account deficit increased by a higher-than-expected 13 per cent, according to figures released on Thursday, as the mining sector continued to cast its shadow over the country's economy.

The deficit in goods, services and investment widened from A$12bn in the second quarter to A$13.5bn in the September quarter, against an expected A$12.7bn.

...and business investment.

[F]igures...showed a higher-than-expected increase in business investment in the third quarter, as mining companies expanded production to satisfy surging Chinese demand for commodities.

Business investment in the third quarter was A$16.3bn, up 2.9 per cent on the second quarter, and 23 per cent higher than the corresponding period last year.

But again, back to manufacturing. In Asia, the upbeat PMI figures in Japan I reported yesterday were replicated in Singapore, where the PMI rose 2.1 points to 53.5 in November -- its highest level in 15 months -- but not in manufacturing powerhouse China, based on this Reuters report.

An official survey of purchasing managers produced for the National Bureau of Statistics showed that...[t]he index derived from the survey, conducted by the China Logistics and Purchasing Association, stood at 54.1 last month, unchanged from October. It trended down from March to July but has since recovered...

By contrast, the purchasing managers' index produced for Hong Kong brokerage CLSA fell below the critical no-change level of 50 for the first time in the 20-month history of the survey. The index dipped to 49.8 last month from 50.1 in October, pointing to a slight deterioration in China's manufacturing economy.

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