Manufacturing Growing Less Quickly but Still Growing

Generali

http://www.markiteconomics.com/MarkitFiles/Pages/ViewPressRelease.aspx?ID=9487

The PMI has just been released which has fallen from 51.9 to 50.5. To get the PMI they ask 'Purchasing Managers', Have you bought more or less stuff in the last month than the month before?

They subtract the Noes from the Yeses and end up with a number they turn into a %age. Above 50 means expansion, below 50 means contraction.

The PMI is generally seen as a decent leading indicator, i.e. a good way of foretelling the future among [STRIKE]soothsayers[/STRIKE] economists.

The drop is put down to falling exports which is the problem when everyone tries to export their way out of trouble at the same time.

shortchanged_2

That figure is certainly getting close to the equivalent zero/flat growth. Not a lot of those green shoots showing through that some one here have been talking about and not great news for that export led recovery that we were supposed to be aiming for.

Generali

shortchanged wrote: »

That figure is certainly getting close to the equivalent zero/flat growth. Not a lot of those green shoots showing through that some one here have been talking about and not great news for that export led recovery that we were supposed to be aiming for.

TBH I suspect that we'll see a lot more of this.

The UK's customers in Europe are suffering which won't help exports: it's hard to export if your buyers are broke!

I don't see an easy way out of the current mess. It feels like asking the apocryphal Irishman for directions to be told, "Well I wouldn't start from here!".

chucky

Generali wrote: »

TBH I suspect that we'll see a lot more of this.

The UK's customers in Europe are suffering which won't help exports: it's hard to export if your buyers are broke!

I don't see an easy way out of the current mess. It feels like asking the apocryphal Irishman for directions to be told, "Well I wouldn't start from here!".

The answer seems to be lots of foreign trips by David Cameron to countries he woudn't normally visit to hopefully improve trade relations by making compromises on human rights policy and by increasing donations.

shortchanged_2

Generali wrote: »

I don't see an easy way out of the current mess. It feels like asking the apocryphal Irishman for directions to be told, "Well I wouldn't start from here!".

I think you're right Generali, I have a feeling we are in for a long period of what is happening now, slight growth, some decline, basically a stagnating economy. The economy is far from where it needs to be and the deficit is not even being tackled like we were told it would by the government.
The thing is we have had 3 years now of rock bottom interest rates and some bouts of QE and we still cannot stimulate any growth.
With inflation running as high as it has for so long peoples spending power has been reduced and with that ontop of the possibility that many people are looking to pay down their debts there certainly doesn't look like there is going to be a consumer led recovery in the UK.
Now this news about manufacturing not doing as well, it ain't looking too hot in the UK at the moment.

By the way things not looking to great in Oz at the moment either Gen, is that right?

Generali

shortchanged wrote: »

By the way things not looking to great in Oz at the moment either Gen, is that right?

It depends how you look at things really.

Annual GDP growth has fallen slightly but remains well above 2%pa. Inflation is practically zero for the last 3 months, seasonally adjusted which is the RBA's (our Central Bank) preferred measure.

Unemployment is up a little but still well below 6%. Nominal house prices are down somewhere between 7% and a fraction of a percent in the capital cities depending where you live.

Interesting bit is China as far as most commentators are concerned. China is certainly a very large customer for Australia's exports of raw materials and it looks likely that demand for those are going to fall in the coming year, especially for iron ore, copper and coal.

However, the drought that Australia has been suffering for a decade or more has decisively broken which should mean big harvests this year into a period where food prices are likely to be very high due to the soya crop failing in much of the world. That should help cushion a drop in external demand from China. Also, the US economy seems to be struggling back onto its feet which should mean an increase in demand for some of Australia's raw materials either directly or indirectly.

Also, while the Aussie private sector has huge debts, the banks are pretty solvent and the Government has very little debt and a pension system that is almost fully funded, including public sector and state pensions.

As ever, we'll see what happens. I have no doubt that there's a bumpy road ahead for Aus but I also doubt it is going to be as bad as many predict. Unless Indonesia invades of course. Then we're FUBAR'd.

Wookster

Generali wrote: »

I don't see an easy way out of the current mess. It feels like asking the apocryphal Irishman for directions to be told, "Well I wouldn't start from here!".

The answer is either a short (~3years) dose of pain allowing all the bankrupt folks to default and for debts to be written off, thus wiping the slate clean or 15 years of hard labour (no pun intended) in paying off debts and regaining competitiveness.

michaels

How are the demographics? (as you know I don't really believe 'funding' of pensions is anything other than an accounting convention unless it is via an externally invested sovereign wealth fund).

Would I be correct in thinking that the base rate cut is partially in response to lenders pushing up SVRs enabled by excessive market concentration in the banking sector?

Generali wrote: »

It depends how you look at things really.

Annual GDP growth has fallen slightly but remains well above 2%pa. Inflation is practically zero for the last 3 months, seasonally adjusted which is the RBA's (our Central Bank) preferred measure.

Unemployment is up a little but still well below 6%. Nominal house prices are down somewhere between 7% and a fraction of a percent in the capital cities depending where you live.

Interesting bit is China as far as most commentators are concerned. China is certainly a very large customer for Australia's exports of raw materials and it looks likely that demand for those are going to fall in the coming year, especially for iron ore, copper and coal.

However, the drought that Australia has been suffering for a decade or more has decisively broken which should mean big harvests this year into a period where food prices are likely to be very high due to the soya crop failing in much of the world. That should help cushion a drop in external demand from China. Also, the US economy seems to be struggling back onto its feet which should mean an increase in demand for some of Australia's raw materials either directly or indirectly.

Also, while the Aussie private sector has huge debts, the banks are pretty solvent and the Government has very little debt and a pension system that is almost fully funded, including public sector and state pensions.

As ever, we'll see what happens. I have no doubt that there's a bumpy road ahead for Aus but I also doubt it is going to be as bad as many predict. Unless Indonesia invades of course. Then we're FUBAR'd.

Generali

michaels wrote: »

How are the demographics? (as you know I don't really believe 'funding' of pensions is anything other than an accounting convention unless it is via an externally invested sovereign wealth fund).

Would I be correct in thinking that the base rate cut is partially in response to lenders pushing up SVRs enabled by excessive market concentration in the banking sector?

Demographics are ok. There is an aging population but the birth rate is pretty high and it is notable how many 'middle class' people have 3 or 4 children rather than the 1 or 2 more usual in Europe.

There is also quite a lot of immigration: a quarter of Aussies were born outside Australia.

Pensions are funded via the Super system where an employer pays 9% of your income into a pension fund. In addition, promises that were made prior to the Super system being set up are partly funded by the Future Fund, a hypothecated Sovereign Wealth Fund which is wholly owned by the Australian Government but run by independent trustees. That fund is topped up when the Federal Government runs a surplus (most years: almost every year when The Coalition are in power in fact) and also is given a big chunk of shares in any privatisation.

The cut in the base rate has been partly driven by banks being able to push up rates following the near total collapse of the shadow banking system in Aus in 2008. It is also being driven by a series of macro economic factors: very low and falling inflation, falling growth and a very high currency.

For an example as to how strong the currency is, this retail job (link) pays about £35,000 plus 9% pension with 5 weeks paid holiday!