Tuesday, 3 July 2007

Robust Tankan and global manufacturing PMI readings

Yet another indication that a rate hike is likely in Japan soon. From Bloomberg:

Confidence among Japan's largest manufacturers held near a two-year high and companies said they're increasing spending, supporting the central bank's argument for raising interest rates.

The Tankan, Japan's most closely watched business survey, showed sentiment was unchanged at 23 points in June from March and near December's two-year high of 25, the Bank of Japan said in Tokyo today. The result matched the median estimate of 26 economists surveyed by Bloomberg News. A positive number means optimists outnumber pessimists.

Sentiment among service companies held at a 15-year high of 22 points for a third quarter as the export-led expansion created jobs and spurred consumer spending. The report supports expectations the bank will raise its key 0.5 percent overnight rate, the lowest among major economies, as soon as August.

However, Reuters reports that another survey indicated more downbeat prospects for manufacturing.

The PMI index for Japan slipped to 50.4 in June, the weakest level in four years and only marginally above 50 -- the dividing line between expansion and contraction.

Britain's PMI also slipped.

Its PMI index fell to 54.3 from 54.7 in May.

But the PMI for the euro zone was better.

For the 13-country euro zone, the Purchasing Managers Index (PMI) rose to 55.6, its best since February and up from 55.0 in May, according to NTC Research, the consultancy which conducts the surveys.

China gave contradictory readings. Bloomberg reports:

The CLSA Purchasing Managers' Index climbed to 55 from 54.1 in May, the highest reading since March 2005...

A separate PMI, published earlier today by the National Bureau of Statistics and the China Federation of Logistics and Purchasing, showed the opposite. It fell to 54.5 in June, the lowest reading in four months.

But the ISM's manufacturing index for the US improved, according to another Reuters report.

In fresh evidence that the factory sector is so far weathering a persistent slump in housing, the Institute for Supply Management's manufacturing index rose to 56.0 in June from 55.0 in May, surpassing forecasts for no change.

That was enough to push up the global PMI. Reuters reports:

The Global Manufacturing PMI, produced by JP Morgan with research and supply management organisations rose to 54.4 in June from 54.1 in May, its highest level since last September...

Cost pressures also rose last month, with the Input Prices Index hitting 67.6, up from 66.0 in May, and its highest level since August last year.

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