Chinese factories post fastest growth in three years, but Ireland struggles – business live – The Guardian

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Chinese factories post fastest growth in three years, but Ireland struggles – business live – The Guardian




UK factories cut jobs at fastest rate since 2012

Newsflash: Britain’s factories are slashing jobs at the fastest rate in over seven years, as the sector continues to shrink.

That’s according to the UK manufacturing report for November, just released, which shows that political and economic uncertainty are hurting the economy.

It found that manufacturing employment in the UK shrank for the eighth straight month, with the pace of job losses the steepest since September 2012.

Data firm Markit reports that:


The UK manufacturing downturn continued in November, as businesses responded to the delay to Brexit and a fresh injection of uncertainty from the forthcoming general election. Output, new orders and employment all fell, while destocking activity resumed as firms depleted buffers built-up in advance of the postponed exit date.

Companies linked further job cuts to cost reduction efforts, efficiencies, Brexit uncertainty, redundancies, natural wastage and staff restructuring.

The UK manufacturing PMI came in at 46.9, up from 45.9 in October, but still below the 50-point mark which separates expansion from contraction.

UK manufacturing PMI

Photograph: Markit

Reaction to follow!





Kit Juckes of Societe Generale reports that investors are cheered by today’s Chinese factory upturn, although other PMI data has been less upbeat.


The first Monday of the month sees a feast of manufacturing PMI data around the world and this morning the overall impression, with some exceptions, is slightly upbeat.

An Japan’s came in at 48.9, up from 48.4, India’s at 5.1 vs 50.6, and China’s Caixin PMI came in at 51.8 vs 51.7. Russia was the most striking disappointment at 45.6 vs 47./2, but we saw a soft number for Sweden at 45.4 vs 46 last, too. Markets haven’t looked beyond the Chinese data too much…





Some reaction to the eurozone PMIs, from trading platform BP Prime:

BP PRIME UK
(@bpprimeuk)

Germany’s PMI rises to 44.1 from prev. 43.8 and more than exp. 43.8

Another (little) sign of rebound for euro area economy@graemewearden


December 2, 2019





Eurozone factories shrink again

Just in: Eurozone factories shrank again in November, for the 10th month in a row.

The IHS Markit Eurozone Manufacturing PMI has risen to 46.9 in November, a little better than expected, from October’s 45.9. That’s below the 50-point mark showing stagnation, continuing a contraction that began back in February.

Factory bosses reported that output, and new orders, both continued to fall last month — although at a slower rate than in October.

Only Greece and France posted a rise in manufacturing activity, Markit says:


Germany remained bottom of the table, despite recording its best PMI reading in five months.

Austria and Spain were the next worst performing, but similarly recorded weaker rates of contraction, whilst Italy registered its lowest PMI print for eight months.

Eurozone PMIs, to November 2019

Eurozone PMIs, to November 2019 Photograph: Markit

This means Europe’s manufacturing sector remains in recession, says Chris Williamson, chief business economist at IHS Markit:


“A further steep drop in manufacturing output in November means the goods-producing sector is likely to have acted as a major drag on the eurozone economy again in the closing quarter of 2019.

The survey data for the fourth quarter so far are indicating a quarterly rate of contraction in excess of 1% for manufacturing.

But… the rise in the PMI is still a positive sign, Williamson adds.


“Although still signalling a steep rate of decline, the manufacturing PMI nonetheless brings some encouraging signals which will fuel speculation that the worst is over for euro area producers, barring any new set-backs (notably in relation to Brexit and trade wars).

In particular, November saw the rate of loss of export sales easing further from July’s recent record, helping pull other indicators such as output, employment, order books and purchasing off their recent lows.





Back to the PMIs. Earlier, Markit reported that Australia’s factories suffered a sharp tumble in new orders last month:

IHS Markit PMI™
(@IHSMarkitPMI)

#Australia‘s manufacturing conditions broadly stagnant in Nov, as a survey-record fall in new orders and a decline in output weighed on the headline #PMI. Read more: https://t.co/rBm0YNPq6k pic.twitter.com/9WW8x1HRVY


December 2, 2019

Manufacturers in Thailand and Indonesia also found November tough:

IHS Markit PMI™
(@IHSMarkitPMI)

#PMI data showed the first deterioration in #Thai manufacturing conditions for 9 months during Nov as goods producers cut back on production volumes amid weak demand. Read more: https://t.co/th1rN6ARMM pic.twitter.com/TFZ4h9EWrQ


December 2, 2019

IHS Markit PMI™
(@IHSMarkitPMI)

#Indonesia‘s manufacturing weakness extended into Nov, with #PMI data signalling that the economy is on course for a slower pace of growth in the fourth quarter. The average PMI so far for Q4 is consistent with #GDP expanding at 4.9%. Read more: https://t.co/Oqtr1CIiuJ pic.twitter.com/fa99feUYWf


December 2, 2019

But South Korea, whose tech sector is particularly exposed to the US-China trade war, picked up last month – with its PMI rising to a seven-month high.

IHS Markit PMI™
(@IHSMarkitPMI)

Further signs of an easing downturn in South #Korea manufacturing sector, with #PMI rising to a seven-month high. Business confidence was also notably less pessimistic, suggesting that firms are building momentum. Read more: https://t.co/vdhAzuwefa pic.twitter.com/EzLYZrKZHD


December 2, 2019





Ted Baker goods are displayed in a store in London.

Ted Baker goods are displayed in a store in London. Photograph: Neil Hall/Reuters

Also in the City, shares in fashion chain Ted Baker have slumped to a 10-year low after it warned it has overstated the value of its inventory on its balance sheet.

In a statement to shareholders, it says:


Based on preliminary analysis, the Board estimates an impact on value of £20m to £25m. The Board believes that any adjustment to inventory value will have no cash impact and will relate to prior years.

An independent review is underway. This has knocked 10% off its share price, to 357p, the lowest since 2009.

It’s the latest in a series of blows to the company, whose founder Ray Kelvin resigned earlier this year after allegations of improper conduct.





Shares in mining companies are rallying, on hopes that Chinese factories will be buying more iron ore, copper and coal.

Rio Tinto (+2.5%), Glencore and BHP Billiton (both 1.8%) have jumped to the top of the FTSE 100 leaderboard in London. That’s lifted the Footsie by 44 points, or 0.6%, in early trading.

China’s improved PMI surveys have “given the world a boost”, says Jim Reid of Deutsche Bank.





AIB: Brexit pain hurts Irish industry

Ireland’s manufacturers are suffering from Brexit uncertainty, says Oliver Mangan, AIB Chief Economist.

He says:


“The primary source of the slowdown in manufacturing is weakening foreign demand. While total orders again rose marginally in November, new export orders fell for a fifth consecutive month and at a solid pace. Firms report that Brexit related weakness in the UK as well as softer US demand are weighing on export orders.

“The Irish November PMI reading of 49.7 remains well above the average for the Eurozone, which is put at 46.6, and the level of 48.3 in the UK as the stronger domestic economy helps support activity here. A further positive note is that confidence among Irish manufacturers regarding future output rose to a five-month high in November. Nonetheless, Brexit uncertainty continues to weigh on confidence levels, which remain low on a historical basis.”

It’s easy to blame Brexit, of course. But repeated delays to the exit date, and uncertainty over border arrangements and the future UK-EU trading relationship must be making it hard for firms to plan ahead.

Plus, a hard border between the Republic and the UK, wherever it is sited, would seriously impact firms who export through Britain’s road network to the rest of Europe.





Ireland’s factories cut jobs as output shrinks

We’ll get a lot of PMI data today, but Ireland’s stands out as particularly worrying.

Irish manufacturing activity shrank last month, for the fifth time in six months, according to the latest healthcheck from AlB and Markit.

The survey found that output fell again, forcing bosses to cut workforce numbers for the first time since September 2016.

Although total new business increased for the second month running, export sales shrank at a faster pace – due to weaker demand from US and UK customers.

The survey says:


Export sales decreased further during November, with the rate of contraction accelerating from October. Panellists stated that they had observed an overall weakening of foreign demand conditions, singling out weaker US and UK markets.

Business confidence improved to a five-month high, but remained historically weak as Brexit uncertainty weighed on sentiment.

This all dragged Ireland’s factory PMI down to 49.7 in November from 50.7 in October – showing a small contraction.

Ireland’s manufacturing PMI

Ireland’s manufacturing PMI Photograph: AIB/Markit




Asia-Pacific stock markets have been lifted by the rise in Chinese factory growth.

The main indices are mainly higher today, with Shanghai’s CSI 300 up 0.2%.





China’s PMI: What the experts say

Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group, says China’s factory slump may have bottomed out.

But while today’s PMI report shows some recovery, the trade war between Washington and Beijing is still hurting.


“China’s manufacturing sector continued to recover in November, with both domestic and overseas demand rising and the employment subindex returning to expansionary territory for the second time this year.

“However, business confidence remained subdued, as concerns about policies and market conditions persisted, and their willingness to replenish stocks remained limited. This is a major constraint on economic recovery, which requires continuous policy support. Currently, manufacturing investment may be lingering near a recent bottom. A low inventory level has lasted for a long time. If trade negotiations between China and the U.S. can progress in the next phase and business confidence can be repaired effectively, manufacturing production and investment is likely to see a solid improvement.”

But…Julian Evans-Pritchard of Capital Economics is cautious, telling clients:


“The improvement last month was driven by different factors across the two manufacturing indices, making it hard to pinpoint the reason for the apparent uptick industrial activity,”

“We doubt this marks the start of a decisive rebound in activity.





Chinese factory growth hits three year high

A production line making high-precision sheet aluminium at Shandong Weiqiao Pioneering Group in Zouping, Shandong Province of China

A production line making high-precision sheet aluminium at Shandong Weiqiao Pioneering Group in Zouping, Shandong Province of China Photograph: VCG/VCG via Getty Images

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

A new month means a new healthcheck on the world’s manufacturing sector…. and welcome signs of improvement from China. But Europe, and the UK, may continue to struggle.

Growth at Chinese factories has hit a three-year high in November, according to the latest healthcheck from Caixin/Markit.

Companies reported a “solid increase” in both output and new business last month, including a pick-up in orders from overseas.

This suggests that the shock of the US-China trade war may be fading.

The survey says:


New business rose strongly, which underpinned a further solid increase in production. Notably, new export orders saw the first back-to-back monthly rise for over a year-and-a-half.

Bosses also reported that they have stopped slashing staffing levels:


Staffing levels were broadly stable following a seven-month sequence of decline, but capacity pressures persisted, with backlogs of work expanding again.

This pushed the Caixin China manufacturing PMI up to 51.8, up from 51.7, which is its highest level in three years. Any reading over 50 shows growth.

Here are the key points:

  • Solid increases in output and new business
  • Employment broadly stable
  • Inflationary pressures remain weak

China’s manufacturing PMI, to November 2019

China’s manufacturing PMI, to November 2019 Photograph: Caixin/Markit

Confusingly, there’s also a separate official Chinese factory PMI, released last weekend. It also showed a rise in output (up to 50.2, from 49.3), bolstering hopes that manufacturers are resisting trade tensions.

Reaction to follow….

Also coming up today

New PMI data from the eurozone, and the UK, will show whether their factories are still struggling. Last month’s ‘flash’ PMI readings showed that Britain’s manufacturing was contracting in November, so today’s data could be a disappointment.

The European Central Bank’s new president, Christine Lagarde, is testifying to the European Parliament. Expect questions about Europe’s weak growth, the ECB’s stimulus programme, and its plans to fight the climate emergency.

The agenda

  • 9am GMT: Eurozone manufacturing PMI for November. Expected to rise to 46.6 from 45.9, showing a slower contraction
  • 9.30am GMT: UK manufacturing PMI for November. Expected to fall to 48.3 from 49.6, showing a faster contraction
  • 2pm GMT: ECB president Christine Lagarde testifies to the European Parliament
  • 3pm GMT: US manufacturing PMI for November. Expected to rise to 49.2, from 48.3, showing a slower contraction

Updated

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