Canadian factory activity grows at a slower pace in October - Reuters News

TORONTO, Nov 2 (Reuters) - Canadian manufacturing activity expanded for the fourth straight month in October as the sector continued to recover from the coronavirus crisis, with output climbing at the fastest pace in over two years, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) fell to a seasonally adjusted 55.5 in October, pulling back from its highest level in more than two years in September at 56.0. Since July, the PMI has been above the 50 threshold that indicates expansion in the sector.

"October data suggests another improvement in the health of the Canadian manufacturing sector," Shreeya Patel, an economist at IHS Markit, said in a statement. "New orders and output have increased sharply with firms remaining optimistic that production will improve over the course of the year."

The measure of output rose to its highest since August 2018 at 55.2 from 54.9 in September, helped by stronger client demand and additional workforce numbers. The employment index was 51.2, dipping from 54.3.

Still, manufacturers said that insufficient staffing numbers and delays in the receipt of materials from suppliers had led to the accumulation of incomplete work. The backlogs of work index rose to 54.6, its highest since June 2018, from 51.1 September.

Higher backlogs highlight capacity pressures at Canadian manufacturers but "will help sustain the recovery in output through the winter should new orders drop off," Patel said.

The recent reintroduction of some measures to contain the coronavirus pandemic is expected to weigh on economic activity in the near-term, the Bank of Canada said last week.

U.S. manufacturing near two-year high in October - ISM - Reuters News

WASHINGTON, Nov 2 (Reuters) - U.S. manufacturing activity accelerated in October, with new orders jumping to their highest level in nearly 17 years amid a shift in spending toward goods like motor vehicles as the COVID-19 pandemic drags on.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity increased to a reading of 59.3 last month. That was the highest since November 2018 and followed a reading of 55.4 in September.

The ISM survey is the last piece of major economic data before Tuesday's presidential election. A reading above 50 indicates expansion in manufacturing, which accounts for 11.3% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 55.8 in October.

The strength in manufacturing will likely keep the economy floating, with growth expected to slow sharply in the fourth quarter after a historic 33.1% annualized rate of expansion in the July-September period.

Growth last quarter, which followed a record 31.4% pace of contraction the April-June quarter, was juiced up by more than $3 trillion in government pandemic relief. Government money has virtually dried up and there is no deal in sight for another rescue package.

The coronavirus crisis has pulled spending away from services towards goods that complement the changed life-style. Spending on goods has surpassed its pre-pandemic level.

The ISM's forward-looking new orders sub-index surged to a reading of 67.9 last month, the highest reading since January 2004, from 60.2 in September.

With orders booming, manufacturing employment expanded for the first time since July 2019. The ISM's manufacturing employment gauge rose to a reading of 53.2 from 49.6 in September.

That likely supported overall job growth in October. According to a Reuters survey of economists, nonfarm payrolls probably increased by 700,000 jobs last month after rising 661,000 in September. Employment growth has cooled from a record 4.781 million in June.

About 11.5 million of the 22.2 million jobs lost during the pandemic have been recovered. The government is scheduled to publish October's employment report on Friday.

China's factory activity rises to near-decade high in October - Caixin PMI - Reuters News

BEIJING, Nov 2 (Reuters) - Activity in China's factory sector accelerated at the fastest pace in nearly a decade in October as domestic demand surged, a private business survey showed on Monday, adding further momentum to an economy that is quickly recovering from the coronavirus crisis.

The Caixin/Markit Manufacturing Purchasing Managers' Index(PMI) rose to 53.6 from September's 53.0, with the gauge staying above the 50-level that separates growth from contraction for the sixth consecutive month.

Analysts polled by Reuters had forecast the headline reading would remain steady at 53.0.

China's vast industrial sector is steadily returning to the levels seen before the pandemic paralysed huge swathes of the economy early this year, though the global outlook is dimming as many Western countries battle still rising COVID-19 infections and go back into virus lockdowns.

October's PMI reading was the highest since January 2011.

Pent-up demand, stimulus-driven infrastructure and surprisingly resilient exports have propelled the manufacturing rebound. Consumption, although hit hard earlier in the year, has also recovered in the third quarter. (Full Story)

"Recovery was the word in the current macro economy, with the domestic epidemic under control. Manufacturing supply and demand improved at the same time," Wang Zhe, senior economist at Caixin Insight Group, wrote in a note accompanying the survey release.

While the Caixin survey showed total new orders surged to the highest level since 2010, the gauge for new export orders fell from the month before, though it remained in expansionary territory.

"The second wave of coronavirus infections in Europe and the third wave in the U.S. have significantly suppressed China’s overseas demand," Wang said.

The private survey also showed Chinese factories hired workers for the second month in a row, though the increase was slight.

Factory output also rose slightly from the month before, while a gauge of business confidence rose to a multi-year high.

The pandemic has been largely controlled in the world's second-largest economy, although a local outbreak emerged recently in the western region of Xinjiang.

The Caixin survey focuses more on small and export-oriented firms while China's official survey, which was released on Saturday, largely tracks large companies and state-owned enterprises.

The official gauge showed factory activity expanded at a slightly slower pace in October but it was slightly above analysts' expectations. (Full Story)

"There are still many uncertainties outside of China, so policymakers need to be cautious about normalizing post-coronavirus monetary and fiscal policies," said Wang.

Analysts expect China's economy to grow about 2% in 2020, the weakest since 1976 but still far stronger than other major economies.

Euro zone factories boomed in October as Germany roared -PMI - Reuters News

Euro zone factory growth strong in October

Activity driven by buoyant Germany

Focus likely to be on services PMI due on Wedensday

By Jonathan Cable

LONDON, Nov 2 (Reuters) - Manufacturing growth in the euro zone boomed in October but the recovery from severely depressed activity at the height of the coronavirus pandemic was again mostly driven by a buoyant Germany, a survey showed.

Also likely of concern to policymakers, and highlighting a further divergence in the recovery, a flash reading of the overall survey showed activity in the bloc's dominant service industry contracted last month as a second wave of the virus swept across Europe. (Full Story)

As the virus resurges, Germany and France - the bloc's two biggest economies - have again imposed tough lockdown measures, likely dealing a further heavy blow this month as restaurants, gyms and shops stay closed.

Still, IHS Markit's final Manufacturing Purchasing Managers' Index climbed to 54.8 in October from September's 53.7, its highest reading since July 2018 and ahead of the 54.4 flash estimate. Anything above 50 indicates growth.

An index measuring output, which feeds into a Composite PMI due on Wednesday and is seen as a good gauge of economic health, bounced to 58.4 from 57.1 in September, comfortably beating its 57.8 flash reading.

"Germany has done spectacularly well over recent months but as the lockdowns begins to impact not only on Germany but its main export market it will take the edge off the recovery," said Peter Dixon at Commerzbank.

"The fourth quarter for the euro zone as a whole is going to look pretty grim, we are still working through our numbers but it won't be good."

German factories saw record growth in new orders in October but it has recently imposed controls almost as strict as the lockdowns of the first phase of the crisis suggesting at least some of that manufacturing activity might be curtailed. (Full Story) (Full Story)

Manufacturing activity in France strengthened slightly although its new lockdown will also likely hit the sector soon. (Full Story)

In Britain, outside the currency union and due to go under its own second lockdown from Thursday, factories lost more momentum, especially among consumer goods makers, adding to signs of a slowdown in the economy as coronavirus cases mount again. GB/PMIM

It was a similar picture in central Europe, as economies there posted improved activity, with employment rising, but lockdown measures and a fast spread of infections foreshadowing a slowdown. (Full Story)

There is a high risk the resurgence in coronavirus now underway across Europe would halt the nascent euro zone recovery, a recent Reuters poll showed. ECILT/EU

The euro zone economy contracted 11.8% in the second quarter, when many businesses were closed and citizens urged to stay home. But it expanded a much-better-than-expected 12.7% last quarter after many lockdown restrictions were eased, official data showed on Friday. (Full Story)

Demand soared in October and factories were able to build up a healthy backlog of work. Optimism waned, however, and as in every month since May 2019, headcount was reduced, the PMI showed. The future output index fell to 62.7 from 63.8.

German factories had surge in new business in October ahead of restrictions -PMI - Reuters

BERLIN, Nov 2 (Reuters) - German factories saw record growth in new orders in October, a survey showed on Monday, fuelling a recovery which is under threat from new restrictions imposed by Chancellor Angela Merkel to tackle rising coronavirus infections.

IHS Markit's Final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose to 58.2 in October, the highest reading since February 2018.

This was higher than a flash reading of 58.0 and surpassed September's 56.4 mark.

Phil Smith, principle economist at IHS Markit, said the recovery was being clouded by rising COVID-19 cases in Europe.

"Less positively and perhaps a sign that growth could be about to slow as more firms get back to pre-COVID levels of output, we saw the first setback to manufacturing expectations for seven months in October," said Smith.

"It comes amid rising numbers of coronavirus cases in Europe, and the increased threat of renewed disruption to supply and demand that comes with it," he added.

Chancellor Angela Merkel last week announced an emergency month-long lockdown that includes the closure of restaurants, gyms and theatres to reverse a spike in coronavirus cases that risks overwhelming hospitals.

The measure went into effect on Monday and include limiting private gatherings to 10 people from a maximum of two households. Restaurants, bars, theatres, cinemas, pools and gyms will be shut and concerts cancelled. Schools and daycare centres remain open as well as shops under strict conditions.

UK factories lose more momentum in October -PMI - Reuters News

LONDON, Nov 2 (Reuters) - British factories lost more momentum in October, especially among consumer goods makers, according to a survey which added to signs of a slowdown in the economy as the number of coronavirus cases mounts again.

However, a measure of optimism for the year ahead hit its highest level in nearly three years.

The IHS Markit/CIPS manufacturing Purchasing Managers' Index (PMI) fell to 53.7 from September's 54.1 but was up a touch from a preliminary reading and remained above the 50.0 threshold denoting growth.

Stock-building by clients in Europe ahead of a possible no-deal end to Britain's post-Brexit transition period on Dec. 31 and increased demand from the recovering economies of China and the United States boosted exports, IHS Markit said.

Intermediate and investment goods industries reported a strong October. But consumer goods firms, which are more sensitive to short-term changes in the economy, saw output and new business fall for the first time since they began to recover from the COVID-19 shock earlier this year.

Britain's economic recovery from the coronavirus lockdown has lost steam as the pandemic builds again and as the government scales back its jobs support scheme.

Most economists polled by Reuters expect the Bank of England to announce a fresh increase in its bond-buying stimulus programme on Thursday. (Full Story)

Monday's PMI survey showed job losses were most marked in the consumer goods sector. By contrast, staffing levels rose for the first time in eight months in the intermediate goods category.

Over 60% of companies expected output to rise over the coming year, compared to 10% forecasting a decline.

"However, some firms also raised concerns about the potential impact of both the ongoing pandemic and Brexit uncertainty," Markit said.

Input prices rose by the most since December 2018 and some of the increase was passed on to clients.

The survey was conducted between Oct. 12-27.