3.9.12

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

German Manufacturing Declines Again, New Export Orders Fall at Fastest Pace Since April 2009

Posted: 03 Sep 2012 08:33 PM PDT

The Markit Germany Manufacturing PMI® – Final Data shows the German export downturn gathers momentum.
Key points:

Manufacturing PMI rises from July's 37-month low
Output, new orders and employment all drop at slower rates...
...but export downturn continues to gather pace



August data pointed to a fall in production levels for the fifth month running, and the rate of expansion remained relatively steep in the latest survey period.

August data highlighted a sharp fall in new order levels, although the rate of contraction eased slightly from July's low. The slower pace of decline largely reflected a less marked drop in domestic demand, as new export work fell at the steepest rate since April 2009.

Survey respondents commented on a general slowdown in global demand and particular weakness in new business inflows from Southern Europe. Investment and intermediate goods producers recorded the steepest reductions in new export orders. Meanwhile, August data signalled a rapid fall in outstanding business at manufacturing firms, which extended the current period of contraction to 12 months.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

How to Get to Mars

Posted: 03 Sep 2012 06:45 PM PDT

In the spirit of Labor Day weekend, and a well-deserved break from grim economic news, please consider "How to Get to Mars"



Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Asia Export Machine Cracks Wide Open: South Korea Production Falls at Fastest Rate in Eight Months; Taiwan Exports Deteriorate Sharply; Global Recession Call Revisited

Posted: 03 Sep 2012 10:01 AM PDT

It's not just Chinese manufacturers that are struggling. It is also Japan, South Korea, and Taiwan. In other words, the Asian export machine has cracked wide open.

South Korea

The Markit South Korea Manufacturing PMI® shows Production Falls at Fastest Rate in Eight Months.

Key points

  • New orders contract at sharp rate
  • New export orders decrease for third month running
  • Falling output prices signalled



Summary

Output contracted at the fastest pace in eight months amid reports of a strike in the auto sector. Moreover, respondents stated that the global recession had adversely affected production. Total new business fell and, although sharp, the rate of contraction was slower than in July. New export business also decreased, though at a slight rate. Panellists stated that weaker domestic demand and a downturn in the global economy had both fed through to the latest contraction in order book volumes

Purchasing activity at manufacturing firms in South Korea decreased for the third successive month in August. The rate of contraction was solid, but eased from that recorded in July.
Taiwan

The Markit Taiwan Manufacturing PMI™ shows Output contracts at steepest pace in the year-to-date.
Key points

  • New orders and new export orders fall for third month running
  • Workforces contract slightly
  • Input and output prices fall in line with weaker demand



Summary

Weaker national and international demand led to a third successive fall in output at manufacturing firms in Taiwan. The pace of the latest contraction was steep and the fastest since December 2011. New orders and new export business both declined, extending the current sequence of contraction to three months. According to panellists, the slowdown in the wider economy resulted in weaker demand for manufactured goods.

In line with falling production, backlogs of work decreased for the third month running. Furthermore, the pace of contraction was the sharpest in 2012 so far.

Input prices at Taiwanese manufacturing firms fell for the fourth consecutive month in August. Although marked, the pace of decrease was slower than that recorded in July. Panellists reported that input costs fell in line with decreasing metal and raw material prices. Moreover, it was mentioned that weaker demand also contributed to the latest decline. In line with input costs, charges fell at a solid rate as manufacturers attempted to maintain competitiveness and attract new business, it was reported.
China

Earlier today I noted China New Export Orders Drop Most Since March 2009, Operating Conditions Down 10th Consecutive Month

Japan

On August 31, I noted Japan Manufacturing PMI Hits 16 Month Low, New Orders Plunge

Global Recession

In the South Korea report it was interesting to see the line "respondents stated that the global recession had adversely affected production".

I certainly believe the global economy is in recession and stated so on July 11 in Case for US and Global Recession Right Here, Right Now.

Recession Definitions

Contrary to popular myth, recession does not mean two consecutive quarters of economic contraction. Rather, two consecutive quarters of economic contraction is a sufficient, but not necessary condition.

In the US, the NBER is the official designator of recession start and end points. Many recessions have started with GDP still growing.

The "Conditions for Global Recession" are even looser. "The International Monetary Fund (IMF) considers a global recession as a period where gross domestic product (GDP) growth is at 3% or less. In addition to that, the IMF looks at declines in real per-capita world GDP along with several global macroeconomic factors before confirming a global recession."

Global GDP will struggle to rise 1% and it may even contract. Even 2% is in recession territory, and that is a given.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

China New Export Orders Drop Most Since March 2009, Operating Conditions Down 10th Consecutive Month; China's Export Machine Grind to a Halt

Posted: 02 Sep 2012 11:49 PM PDT

The HSBC China Manufacturing PMI™ shows Manufacturing sector operating conditions worsened at the sharpest rate in 41 months.
Summary

August data signalled a renewed decline in Chinese manufacturing output, as new business decreased at the sharpest rate in nine months. Consequently, backlogs of work fell modestly, and job shedding was recorded for the sixth month in succession. On the price front, average input costs declined at the sharpest rate in 41 months, while the rate of output price discounting remained sharp.



The pace of reduction in new orders was solid, and the most marked in nine months. Meanwhile, new export orders also decreased during August, and at the sharpest rate since March 2009.

With new business decreasing further, companies depleted their volumes of work-in-hand (but not yet completed) over the month. Although only modest, the rate of decline in outstanding business was the sharpest since January 2009.

Commenting on the China Manufacturing PMI™ survey, Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC said:

"The final reading of the HSBC manufacturing PMI (August) confirmed that China's manufacturing sector still faces intensifying downward pressure. New export orders contracted at the fastest pace since March 2009, this, combined with a record high in stocks of finished goods sub-index, and a 41-month low employment index, suggests China's exporters are facing increasing difficulties amid stronger global headwinds. Beijing must step up policy easing to stabilize growth and foster job market conditions."
China's Export Machine Grind to a Halt

Notice the last sentence above regarding what China allegedly "must" do. Also note the faith in "easing" to stabilize growth.

Economists seem to believe the role of central banks is to prevent every recession. That policy works for a while, then as happened in the US with the housing crash, an even bigger recession occurs that the central bank is unable to stop or even slow.

The US economy is cooling substantially and Europe is a complete basket case. Moreover, China's infrastructure is already seriously overbuilt. There are no magic solutions for China.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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