The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Invest with smart knowledge and objective odds

EUROZONE COMPOSITE PMI STEADY AT 53.1

imageThe recovery prospects for the euro area economy continued to brighten in March. At 53.1, the final Markit Eurozone PMI® Composite Output Index signalled output growth for the ninth successive month, underpinned by improving market conditions and rising levels of new business.

Although the headline output index was lower than February’s 53.3 and the earlier flash estimate of 53.2, it remained consistent with a 0.5% increase in GDP for the first quarter as a whole, improving on the 0.3% registered in the final quarter of 2013. The currency union is currently enjoying its strongest growth spell since the first half of 2011.

Among the five countries for which both manufacturing and services data are available, the steepest increase in output was signalled by Ireland where growth surged to a seven-year record. Germany was in second position overall – despite seeing its rate of increase ease to a five-month low – edging out Spain which came a close third following a slight growth acceleration. The big mover was France, which stepped back into expansion territory following contractions in each of the past four months. Italian growth slipped to a three-month low.

The outlook for the eurozone economy remains on the upside, with new orders rising and a slight accumulation of backlogs of work during March. The upturns in business activity, new orders and outstanding business have not yet encouraged a recovery in the labour market, but signs are also improving on this front too.

Employment has held broadly steady in each of the past four months. March saw further job creation in Germany and Ireland, and a notable shift closer to stabilisation in France following a run of job losses that started in November last year. Rates of decline accelerated slightly in Spain and Italy, but remained modest compared to rates seen during much of the past two-to-three years.

Price pressures moderated, as highlighted by average output charges declining and input cost inflation easing to an eight-month low. Selling prices have now fallen throughout the past two years. Companies indicated that strong competition remained a factor affecting their pricing power during the latest survey period.

The Eurozone Services Business Activity Index posted 52.2 in March, down slightly from February’s 32-month high of 52.6. The index therefore signalled an expansion of output for the eighth successive month and one of the fastest rates of growth since the first half of 2011.

The rate of expansion in Ireland surged higher, closing in on December 2013’s near-seven year record. Although France saw only a modest increase in business activity, this was a marked improvement on the contractions registered in the prior four months. Services output growth slowed to a five-month low in Germany and ticked higher in Spain, while Italy fell back into contraction.

The latest increase in eurozone services output was underpinned by a moderate increase in new business, which rose at a similar pace to February. The outlook for the sector also brightened, as business confidence* hit a near-three year peak. Optimism was highest in Ireland (despite dipping over the month), improved in Italy and Spain, and held broadly steady in France and Germany.

Employment was broadly unchanged in March, as rising levels of business activity and new orders aided in stabilising the trend in service sector headcounts. Strong jobs growth was again signalled in Ireland, while Germany also posted a modest increase (albeit at a slower pace than in February). Although further losses were reported in France, Italy and Spain, rates of decrease slowed in France and Spain and steadied in Italy.

Strong competition remained a factor affecting eurozone service providers in March, leading to further selling price discounts. Average charges fell for the twenty-eighth month running, with only Germany reporting an increase.

The moderation in price pressures was also reflected on the cost side, with average input price inflation in the euro area service sector the weakest since June last year. Rates of increase eased in almost all of the nations covered, the exception being Italy (where the pace was broadly stable).

image

HSBC CHINA COMPOSITE PMI EASES TO 49.3

imageHSBC China Composite PMI™ data (which covers both manufacturing and services) signalled that business activity in China fell for the second month running in March. Though slight, the rate of contraction was still the sharpest since November 2011, with the HSBC Composite Output Index posting at 49.3 in March, down from 49.8 in February.

Data for March signalled that the reduction in overall business activity was driven by the manufacturing sector, which posted its sharpest contraction of output since November 2011. Meanwhile, services activity growth strengthened to a four-month high, as signalled by the HSBC China Services Business Activity Index posting at 51.9 in March, up from 51.0 in February. However, growth remained subdued in the context of historical data.

New business followed a similar trend to output, with new work falling for the second successive month at manufacturers, but rising at service sector firms. The rate of new order growth in the service sector was little-changed from February and moderate, amid reports of new client wins. However, manufacturers’ new orders fell at the strongest rate in 28 months.

Chinese manufacturers cut their staffing levels again in March, albeit marginally. In contrast, higher volumes of new work led service providers to expand their payroll numbers at the fastest rate since June 2013. Notably, job creation at service providers offset job shedding at manufacturers, and led to the first increase of employment at the composite level for five months.

March data signalled that outstanding business fell for the second month in a row at manufacturers, albeit marginally. Backlogs of work also decreased slightly at service sector firms. While manufacturers reported that fewer new orders enabled them to lower the level of work-in-hand, service providers linked the reduction to higher staffing levels.

Input costs faced by Chinese manufacturers fell at the sharpest rate since August 2012 in March. According to panellists, suppliers cut their charges in response to
weaker demand for inputs. Meanwhile, cost burdens faced by service sector firms rose at the quickest pace in four months, amid reports of increased staffing costs. At the composite level, total input costs fell markedly over the month. Output charges fell sharply in China’s manufacturing sector, with a number of panellists citing lower input costs and competitive market pressures. In contrast, service providers increased their selling prices for the second month in a row, albeit marginally.