German Manufacturing Index Signals Contraction

[CommissarJones]

That's according to the IHS Markit Flash Germany PMI report for January, released last week. The manufacturing PMI fell to 49.9, dropping below the level of 50 that separates growth and contraction for the first time since November 2014. Some other extracts:

- January’s survey data showed a decrease in overall inflows of new business – the first such decline since December 2014.
- The [manufacturing] sector’s order book situation continued to worsen, showing the steepest decline in incoming new work since 2012.

The German economy contracted in Q3 18, will we be looking at a recession when the Q4 figures are released? It's another indicator militating against optimism about the global economic outlook; indeed, this report was released in the same week that the International Monetary Fund cut its global growth forecasts for the second time in three months, and this week saw a poorly received earnings report from Caterpillar, surely a bellwether cyclical company.

[CommissarJones]

Italy is now in recession.

[Ashfordian]

China has sneezed and it looks like Europe is catching the cold, and it was not a healthy patient before.

Where is there to go for the EU with monetary policy to defend against this? They already have negative interest rates.

Is the ECB going to follow the Japanese and start buying publically traded stocks?

[OhNoNotimAgain]

Is the ECB going to follow the Japanese and start buying publically traded stocks?

I hope not. The West seems to be migrating to a version of communism with American and European tendencies as one Chinese wag observed of the 2008 bank bailout.

[TUK020]

That's according to the IHS Markit Flash Germany PMI report for January, released last week. The manufacturing PMI fell to 49.9, dropping below the level of 50 that separates growth and contraction for the first time since November 2014. Some other extracts:

- January’s survey data showed a decrease in overall inflows of new business – the first such decline since December 2014.
- The [manufacturing] sector’s order book situation continued to worsen, showing the steepest decline in incoming new work since 2012.

The German economy contracted in Q3 18, will we be looking at a recession when the Q4 figures are released? It's another indicator militating against optimism about the global economic outlook; indeed, this report was released in the same week that the International Monetary Fund cut its global growth forecasts for the second time in three months, and this week saw a poorly received earnings report from Caterpillar, surely a bellwether cyclical company.

Thank you CommissarJones, most of all because you have posted something on the Macro/Global topics that doesn't involve arguing about who gets to bear Elon's babies.

[CommissarJones]

The West seems to be migrating to a version of communism with American and European tendencies as one Chinese wag observed of the 2008 bank bailout.

"The EU is the old Soviet Union dressed in Western clothes."
"The most puzzling development in politics during the last decade is the apparent determination of Western European leaders to re-create the Soviet Union in Western Europe."
(Both quotes are by Mikhail Gorbachev.)

Thank you CommissarJones, most of all because you have posted something on the Macro/Global topics that doesn't involve arguing about who gets to bear Elon's babies.

OK, that is funny. Happy to be of service.

[CommissarJones]

From the UK Q4 GDP figures released today:

- Growth slowed to 0.2% from 0.6% in Q3.
- The full-year growth rate of 1.4% was the lowest since 2012.
- The economy contracted by 0.4% in December.

German and Japanese data are due on Thursday.

[CommissarJones]

Germany managed to avoid entering a recession in Q4, but the economy recorded zero growth, so it's hardly an inspiring set of figures. Japan expanded by 0.3%, rebounding from a contraction in Q3.

[OhNoNotimAgain]

Germany managed to avoid entering a recession in Q4, but the economy recorded zero growth, so it's hardly an inspiring set of figures. Japan expanded by 0.3%, rebounding from a contraction in Q3.

Amazing how much damage Brexit has done to other economies, even before it has happened.

[CommissarJones]

The contraction in German manufacturing is accelerating. Markit's Flash Germany Manufacturing PMI fell to 47.6 in February, the lowest level in six years, and has dropped more than 7% in two months. Unsettling. And it's no surprise that euro area manufacturing also has entered contraction for the first time since 2013. The US manufacturing index continues to indicate expansion, but fell to a 17-month low in February.

[CommissarJones]

The US economy expanded at a 2.6% annualised rate in Q4 18, according to today's preliminary data, slowing from 3.4% in Q3 and 4.2% in Q2. For all of 2018, growth was 2.9%, the best performance since 2015.

[CommissarJones]

In view of the euro area's poor economic performance, it's not particularly surprising that the European Central Bank is restarting the stimulus mechanism known as TLTRO.

[CommissarJones]

The IHS Markit/BME Germany manufacturing PMI is now at the lowest level since July 2012, when the euro area debt crisis was raging.

[CommissarJones]

The Bundesbank has cut its forecast for German economic growth in 2019 by more than half, to 0.6% from 1.6% projected in December. Growth in 2020 will come to 1.2%, versus the prior forecast of 1.6%.

And the European Central Bank said yesterday it now expects to keep interest rates on hold at least through the first half of 2020.

[odysseus2000]

The Bundesbank has cut its forecast for German economic growth in 2019 by more than half, to 0.6% from 1.6% projected in December. Growth in 2020 will come to 1.2%, versus the prior forecast of 1.6%.

And the European Central Bank said yesterday it now expects to keep interest rates on hold at least through the first half of 2020.

Some are speculating that this mornings relatively poor non farm US payroll might be enough to cause the FED to cut rates. The German data would support that kind of a move.

Currently thinking the rally in US equity is as much about this as about some potential deal with China.

Regards,

[CommissarJones]

Germany's manufacturing sector recorded its worst monthly performance in seven years in July, according to IHS Markit's flash composite PMI.

[odysseus2000]

Germany's manufacturing sector recorded its worst monthly performance in seven years in July, according to IHS Markit's flash composite PMI.

I find it interesting that these German manufacturing PMI do not seem to have any input into UK Brexit negotiations.

If the UK was to threaten tariffs on German manufactured goods unless there is some better withdrawal terms offered, would that not focus European minds?

As things are with German PMI at an 84 month low it would suggest that there are macro forces at work here, perhaps the effects of Chinese imports and the profits warning that have come out of BMW and Mercedes that are at least in part due to them both losing sales to Tesla.

Interesting that the Germans support an EU which does not seem to be helping them in one of their core competencies although they have a weak Euro courtesy of the misery that is Greece.

Of course all of the German manufacturing PMI may just be secular trends, more automation etc that are pushing down manufacturing and bringing up services as we have seen in the UK and the US.

It is always very difficult to know what is happening in macro economics and even if it is significant or some kind of noise, but an 84 month decline does feel a bit more than just statistical fluctuations.

Regards,

[tikunetih]

Look forwards, not backwards: leading indicators are suggestive of the EZ Manufacturing PMI likely bottoming out currently/imminently. NB that's not the same as bouncing imminently, but one step at a time...

[odysseus2000]

Look forwards, not backwards: leading indicators are suggestive of the EZ Manufacturing PMI likely bottoming out currently/imminently. NB that's not the same as bouncing imminently, but one step at a time...

Maybe, but when one is looking at only suggestive stuff that is currently/imminently... it is difficult to know if it is noise or real signals.

For now the trend in manufacturing pmi still remains down.

Regards,