Canada Q4 current account deficit narrows to C$7.26 billion - Reuters News

March 1 (Reuters) - Canada's current account deficit narrowed to C$7.26 billion ($5.73 billion) in the fourth quarter of 2020 from a revised C$10.49 billion deficit in the third quarter, on a lower trade deficit on goods, Statistics Canada said on Monday.

Seasonally adjusted figures in billions of Canadian dollars:

                          Q4 2020  Q3(Rev)  Q3(Prev)   Q4 2019

    Current Account        -7.261  -10.493    -7.528    -9.448

    Goods                  -9.490   -9.794    -8.781    -2.312

    Services               +0.285   +0.169    +0.593    -5.546

    Investment Income      +4.171   +1.202    +2.597    +0.072

NOTE: Analysts had on average forecast a current account deficit of C$8.3 billion for the fourth quarter of 2020. Figures are seasonally adjusted.

Canadian factory activity accelerates on rising vaccine optimism - Reuters News

TORONTO, March 1 (Reuters) - Canadian manufacturing activity grew at a faster pace in February than in January as better news on vaccines underpinned confidence and new orders and employment climbed, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 54.8 in February from 54.4 in January. It was the eighth straight month the index was above the 50 threshold that marks expansion in the sector.

The data "highlights another solid improvement in the overall health and resilience of Canada's manufacturing sector," Shreeya Patel, an economist at IHS Markit, said in a statement.

"Firms remain widely upbeat about their growth prospects with vaccination news underpinning optimism during February."

Canada's COVID-19 vaccination campaign is ramping up after earlier supply disruptions. Approval on Friday of AstraZeneca's AZN.L vaccine by Canada's drug regulator could further accelerate the campaign. (Full Story) (Full Story)

The PMI's measure of future output rose to a five-month high of 64.4 from 60.2 in January, showing that manufacturers were optimistic about output levels in the year ahead.

The new orders index rose to 54.4 from 53.6 in January, while the measure of employment was up to 52.6 from 51.3.

Still, restrictions to contain the spread of the pandemic led to intense supply chain pressures, with firms reporting material shortages and transportation delays, IHS Markit said.

The suppliers' delivery times index held steady at 34.0, showing delivery times lengthening for the 18th straight month.

U.S. manufacturing sector at three-year high, cost pressures mounting - ISM - Reuters News

By Lucia Mutikani

WASHINGTON, March 1 (Reuters) - U.S. manufacturing activity increased to a three-year high in February amid an acceleration in new orders, but factories continued to face higher costs for raw materials and other inputs as the pandemic drags on.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rebounded to a reading of 60.8 last month from 58.7 in January. That was the highest level since February 2018.

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index edging up to 58.9 in February.

The increase was despite a global semiconductor chip shortage, which has hurt production at automobile plants.

The survey added to solid January data on consumer spending, building permits, factory production and home sales in suggesting that the economy got off to a strong start in the first quarter, thanks to nearly $900 billion in additional COVID-19 relief money from the government and a drop in new coronavirus infections and hospitalizations.

But the year-long pandemic has gummed up the supply chain, boosting production costs for manufacturers. The survey's measure of prices paid by manufacturers jumped to a reading of 86.0, the highest since July 2008, from 82.1 in January.

This follows data last month showing a surge in consumers' near-term inflation expectations, and fits in with views that inflation will accelerate in the months ahead. Economists are, however, split on whether the anticipated spike in price pressures will be transitory or not.

U.S. Treasury yields have risen, with investors betting that extremely accommodative monetary and fiscal policy will boost inflation. Federal Reserve Chair Jerome Powell has played down these fears, citing three decades of lower and stable prices.

There is also ample capacity in the labor market, with at least 19 million people on unemployment benefits. But Americans grounded at home by COVID-19 have accumulated excess savings, which can provide to a powerful tailwind to spending.

Manufacturing has been driven by strong demand for goods, like electronics and furniture, as 23.2% of the labor force works from home because of the virus. Demand could, however, shift back to services in the summer as more Americans get vaccinated, and slow manufacturing activity from current levels.

The ISM's forward-looking new orders sub-index increased to a reading of 64.8 last month from 61.1 in January. Factories also received more export orders and order backlogs swelled. As a result, factories stepped up hiring last month.

The survey's manufacturing employment gauge rose to 54.4, the highest reading since March 2019, from 52.6 in January.

That offers cautious optimism that employment growth picked up last month after nonfarm payrolls increased by only 49,000 jobs in January. The economy has recovered 12.3 million of the 22.2 million jobs lost during the pandemic.

China's factory activity growth slips to 9-month low- Caixin PMI - Reuters News

BEIJING, March 1 (Reuters) - China's factory activity expanded at the slowest pace in nine months in February as weak overseas demand and coronavirus flare-ups weighed on output, adding pressure on the country's labour market, a business survey showed on Monday.

The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery in China, although domestic COVID-19 cases have since been stamped out and analysts expect a strong rebound in full-year growth. (Full Story)

The results back an official survey released over the weekend showing China's factory activity expanded at the weakest pace since last May. (Full Story)

February also saw the Lunar New Year holidays, when many workers return to their hometowns, although this year saw far fewer trips amid coronavirus fears.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) fell to 50.9 last month, the lowest level since last May.

Analysts polled by Reuters had expected the index to remain unchanged from January's reading of 51.5. The 50-mark separates growth from contraction on a monthly basis.

"Overseas demand continued to drag down overall demand...Surveyed manufacturers highlighted fallout from domestic flare-ups of Covid-19 in the winter as well as the overseas pandemic," said Wang Zhe, senior economist at Caixin Insight Group, in comments released alongside the data.

A sub-index for production fell to 51.9, the slowest pace of expansion since April last year, while another sub-index for new orders fell to 51.0, the lowest since May.

Export orders shrank for the second month. Factories laid off workers for the third month, and at a faster pace, with Wang noting "companies were not in a hurry to fill vacancies."

An index of confidence in the year ahead rose however to 63.0, the highest since October. Input and output prices continued to rise albeit at a slower pace.

"Now the major challenge for policymakers will be maintaining the post-coronavirus recovery while paying close attention to inflation," Wang added.

Analysts from HSBC this week forecast that China's economy would grow 8.5% this year, leading the global recovery from the pandemic.

Euro zone factories buzzing in Feb as demand soars - Reuters News

By Jonathan Cable

LONDON, March 1 (Reuters) - Euro zone factory activity raced along in February thanks to soaring demand, a survey showed on Monday, although the burst of business led to a shortage of raw materials and a spike in input costs.

Restrictions imposed across the continent to try to quell the spread of the coronavirus have shuttered vast swathes of the bloc's dominant services industry, meaning it has fallen to manufacturers to support the economy.

IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) jumped to a three-year high of 57.9 in February from January's 54.8, ahead of the initial 57.7 "flash" estimate and one of the highest readings in the survey's 20-year history.

An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good guide to economic health, climbed to 57.6 from 54.6, well above the 50 mark separating growth from contraction.

"Manufacturing is appearing as an increasingly bright spot in the euro zone's economy so far this year," said Chris Williamson, chief business economist at IHS Markit.

"The solid manufacturing expansion is clearly helping to offset ongoing virus-related weakness in many consumer-facing sectors, alleviating the impact of recent lockdown measures in many countries and helping to limit the overall pace of economic contraction."

A Reuters poll last month showed the bloc was in a double dip recession and that the economy would contract 0.8% this quarter after shrinking 6.9% in 2020 on an annual basis. ECILT/EU

Rocketing demand for manufactured goods pushed factories to increase staffing levels for the first time in nearly two years.

But lockdown measures disrupted supply chains and factories struggled to obtain raw materials, leading to a big increase in delivery times.

"The growth spurt has brought its own problems, however, with demand for inputs not yet being met by supply. Shipping delays and shortages of materials are being widely reported, and led to near-record supply chain delays," Williamson said.

Those shortages allowed suppliers to hike their prices at the fastest rate in almost a decade. The input prices PMI bounced to 73.9 from 68.3.

German inflation unchanged in February - Reuters

BERLIN, March 1 (Reuters) - Germany's annual consumer price inflation held steady in February, the Federal Statistics Office said on Monday.

Consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 1.6% year-on-year after increasing by the same amount in January. February's preliminary data was in line with a Reuters forecast.

The European Central Bank targets an inflation rate of below but close to 2% across the euro zone. Annual inflation for the euro area registered 0.9% in January. (Full Story)

A German national measure of inflation rose in February to 1.3% from 1.0% a month earlier.

Carsten Brzeski, economist at ING, said German inflation could rise to between 3% and 4% and euro zone inflation could breach the 2% level later this year, pushed up by higher energy prices and price markups as economies reopen.

"Consequently, the ECB could still be forced into new action," he added.

Financial markets took fright last week that higher inflation, fuelled by economic recovery, might prompt central banks to tighten monetary policy. Policymakers have played down that threat. (Full Story)

On Friday, Greece's Yannis Stournaras became the first European Central Bank policymaker to openly call for increasing the pace of ECB bond purchases to stem a rise in borrowing costs.

Strong exports lift German factory activity to 3-yr high in Feb - PMI - Reuters News

BERLIN, March 1 (Reuters) - Higher demand from China, the United States and Europe drove growth in German factory activity to its highest level in more than three years in February, brightening the outlook for Europe's largest economy, a survey showed on Monday.

IHS Markit's Final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, jumped to 60.7 from 57.1 in January.

It was the highest reading since January 2018 and came in slightly better than the initial "flash" figure of 60.6.

Factories have been humming along during the pandemic on higher foreign demand, helping the German economy avoid a contraction in the last quarter of 2020 and offsetting a drop in consumer spending amid a partial lockdown to contain COVID-19. (Full Story)

Many manufacturers reported higher demand from Asia, especially China, as well as the United States and European countries, with export sales posting their biggest increase since December 2017, the survey showed.

Phil Smith, Principal Economist at IHS Markit, said supply chain pressures intensified as more firms reported delays than ever before in nearly 25 years of data collection.

"There looks to be further upward pressure on inflation in the German economy from supply bottlenecks and a subsequent surge in manufacturing input costs," Smith noted.

The survey suggested that supply disruption is making it more difficult to replenish stocks, which could complicate production in the coming months, he cautioned.

"Nevertheless, the overriding sentiment for the longer-term outlook is optimism, with a record number of manufacturers expecting to see output rise over the next 12 months."

Still, economists expect the economy to shrink in the first quarter of this year due to a stricter lockdown, which has shut most shops and services since mid-December, and freezing temperatures that slowed construction activity in February.

UK factory output grows at slowest since May, consumer lending slides - Reuters News

• February factory PMI output weakest since May 2020
• BoE's January consumer credit data shows record annual fall
• Manufacturers blame headwinds from Brexit and COVID
• Businesses optimistic about rebound when COVID lockdown ends

By David Milliken and William Schomberg

LONDON, March 1 (Reuters) - British manufacturers reported their slowest output growth since May last month, hit by Brexit and COVID-19-related delays, and consumers cut back heavily on borrowing in January as they returned to lockdown.

Britain's economy is set to shrink sharply in early 2021 though manufacturers are upbeat about prospects later in the year, when they expect lockdown restrictions to end.

The speed of the recovery for households will also be critical. Bank of England data showed consumer borrowing in January suffered its biggest annual decline since records began in 1994, sliding 8.9%.

Britain entered a third national lockdown in January, closing schools, non-essential shops, restaurants and most other businesses open to the public, though people can still travel to work if needed.

Finance minister Rishi Sunak has announced an extra 5 billion pounds ($7.0 billion) of support for services firms and plans to offer more aid in an annual budget on Wednesday.

"All eyes are now on Wednesday's budget to see if the chancellor has any surprises up his sleeve that will give the (manufacturing) industry's businesses a boost for the latter part of the year," said Simon Jonsson, a partner at accountants KPMG.

The BoE expects the economy to shrink 4% in the first three months of 2021 - a sharper decline than during any quarter of the 2008-09 financial crisis though much less than the 20% drop last spring.

The weak consumer borrowing suggests a slump in spending on non-essentials. Official retail sales data showed overall purchases fell by 8.2% in January.

Some of the weak borrowing also reflects repayment of loans by better-off households.

The BoE expects pent-up household savings to be unleashed when lockdowns end, but the scale of any bounce is uncertain.

Manufacturing has fared better than consumer-facing sectors. Nonetheless, February's IHS Markit/CIPS Purchasing Managers' Index (PMI)'s key output component showed growth slipped further after a sharp drop in January.

"Continued COVID-19 related disruption, now exacerbated by manufacturers' cautious navigation of the new UK-EU trading arrangement, has created a scenario in which logistical and supply-side challenges are limiting the rate of economic recovery," said James Brougham, an economist at industry body Make UK.

The broader manufacturing PMI touched a two-month high of 55.1, slightly higher than suggested by a preliminary reading.

However, much of the rise reflects longer delivery times and higher costs - which historically were linked with increased activity but more recently have represented a constraint.

Confidence for the year ahead was its highest in more than six years. This is despite new post-Brexit customs rules which took effect in January and increased the cost and complexity of trade with the European Union, especially for smaller firms.

Materials costs rose at the fastest rate in four years and delivery times lengthened sharply too.