UK factory sector returns to growth in July -CIPS

inspector_monkfish

09:28 03Aug09 UK FACTORY PMI RISES TO 50.8 IN JULY FROM UPWARDLY REVISED 47.4 IN JUNE, HIGHEST SINCE MARCH 2008

09:28 03Aug09 UK MANUFACTURING PMI NEW ORDERS RISES TO 55.9 IN JULY FROM 49.8, HIGHEST SINCE NOVEMBER 2007

09:28 03Aug09 UK factory sector returns to growth in July -CIPS

LONDON, Aug 3- British manufacturing activity grew last month for the first time since March 2008, benefiting from the fastest flow of new orders since November 2007, purchasing managers' data showed on Monday.
The headline manufacturing purchasing managers' index rose to 50.8 from an upwardly revised 47.4 in June, the first time the number from Markit and the Chartered Institute of Purchasing and Supply has been above the 50 level that divides contraction from growth since March last year.

This was well above economists' expectations of a rise to 47.7 and marks a sharp turnaround from the record low of 34.9 set in November, adding to evidence that Britain's economy is over the worst of the recession.
"The turnaround signalled by PMI data during 2009-to-date has been remarkable," said Rob Dobson, senior economist at survey compilers Markit Economics. "The base of the recovery remains broad, which should help with sustaining gains into Q4."

The new orders component of the headline PMI number jumped to 55.9 from June's 49.8, its highest level since November 2007 and the first time orders have risen since March last year.
"Panellists reported that market conditions and client confidence were stabilising, especially in the domestic economy. Successful promotional activity and price discounting also supported sales volumes in July," Markit said.

But there was bad news for jobs. Employment was still contracting rapidly, albeit at the slowest pace since June 2008, with reports of redundancies, hiring freezes and the non-replacement of factory workers who quit.
Spirits company Diageo <DGE.L> reported 500 job losses last month, and steelmaker Corus announced 1,922 workers would lose their jobs late in June.

"The sector is still reeling from the depth of the recession. Restructuring and cost control efforts remain widespread, job losses are still mounting and inventory positions being unwound at an historically rapid pace," Dobson said.
Manufacturing output rose for a second consecutive month in July, and at its fastest pace since December 2007 -- markedly more positive than economists' expectations that official manufacturing data would show a 0.1 percent fall in output in July after a 0.5 percent drop in June.

Companies reported restarting production they had stalled during the depths of the recession earlier in the year, with large firms expanding output faster than smaller ones.
Nonetheless, firms said stocks remained relatively high compared to current demand, and that some were selling inventory to boost cashflow.

inspector_monkfish

GBP rises to a 9mth high of 1.6830 against USD

StevieJ

Looks like the US vacation could be back on.

geoffky

HERE IS A BREAKDOWN OF THESE (GOOD!!) FIGURES:rotfl:
FROM KARL DENNINGER..
The reason is quite simple: The GDP report showed exactly what was going on, and none of this has anything to do with an "economic recovery." We had two distortions that made the first quarter look worse than it should have, and the second quarter (much) better!

Here is the adjusted 2Q GDP:



Now let's go through it.

Government spending in the previous (first) quarter was down at a 4.3% annual rate. The government is 30% of the economy, so we must either (1) add back in that to the 1Q report or (2) subtract it from the second quarter.

But in the second quarter government spending increased at a 10.9% annual rate! So now we must take 30% of that and subtract it off the GDP to get consumer and business activity.

When you do, you find that the "adjusted" (that is, apples to apples in the private economy) GDP shrank at a 6.46% rate.

This, by the way, is more reasonably comparable to the following numbers:

•Revenues across the firms that have reported thus far, which are down some 11%.
•Sales tax receipts, which are down double-digits virtually everywhere.
•Goods shipped (rail and truck), along with port statistics, are all showing double-digit declines averaging 15-20%. You can't sell what's not in the store and to get it in the store you have to ship it.
Since both of the above are actual numbers, that is, not subject to "adjustments" and "seasonality", they are trusted figures. But we can indeed get reasonably close when we look at GDP with the government ex-ed out, yes?

Some will argue that the government can't be ex-ex out, since the government spending is real. Sure, it is.

For how long, and what happens when the stimulus capacity (either due to political will or ability to borrow at a reasonable cost) disappears?

All that additional pulled-forward demand disappears, right?

Steve LIESman mentioned this on the Sunday news shows. Funny how he didn't mention the government distortion Friday when the GDP report was released though, right? Funny indeed how it wasn't until I brought it up on Dennis Kneale's show that it had been completely buried by the mainstream press, and then, only mentioned in passing.

Now add into this the FDIC mess. After I posted my missive yesterday I was sent a table showing the FDIC's remaining funds. I have not done a comprehensive analysis on this but I did eyeball it and the quick check appears to be good; I can't vouch for this on my own detailed analysis but if this is accurate the FDIC is down to $800 million dollars, and a failure of any of the three "seriously in trouble banks" - Colonial, Corus or Guaranty - would blow that tiny little pile of money to Mars.



And oh, by the way, Colonial (which closed at 60 cents Friday) is trading premarket at 48 cents, and reported a stunning loss of $3.02 a share after the market closed Friday - or some five times its per-share price. They also announced that a rescue financing pact they were working on has collapsed, making a FDIC take-over almost certain (if the FDIC ever does its job!)

Inquiring minds are wondering if the correct meme is in fact something like this:

The economy is "improving" because the government showered borrowed money in the form of massive handouts into the economy. However, the government also allowed banks to hide stupendous losses - a trillion dollars or more - by intentionally overstating the value of assets.

"Prompt Corrective Action" is supposed to insure that when the FDIC takes over a bank it suffers little or no loss. This has worked well for over a decade and justified the FDIC holding only $50 billion in cash to insurance $8 trillion in deposits.

But the government's policy of allowing these outright lies in relationship to asset values has now resulted in the FDIC taking 40% losses against assets on average for the banks it has closed since this crisis began.

The consequence is that what looked like a reasonable policy - holding some 1/2 of 1% in insurance, or a leverage ratio of almost 160:1 - has now been shown to be insanely reckless.

These losses are almost entirely as of yet unrealized, but they are real and they are inescapable. They WILL be taken. The FDIC has a "credit line" with Treasury but there is no possible way for it to be able to absorb $400 billion - a rough estimate of the amount that will be absorbed - without a tremendous burst of new debt issuance and the risk of an all-on collapse in both the stock and credit markets.

Enjoy the rally, but keep your eye on the door and your path to it.

The curtains are on fire.

StevieJ

US manfacturing better than forecasts as well, not yet past the magic 50 though.

http://www.bloomberg.com/apps/news?pid=20601068&sid=a_5hcqAqIyRQ

julieq

Early indications are that August is going to be significantly down in comparison to July. Some of this is because it's European holiday season.