Canadian factory activity holds near record-setting pace in April - Reuters News

TORONTO, May 3 (Reuters) - Canadian manufacturing activity grew for the 10th straight month in April as production and new orders climbed, with the pace easing only slightly from the previous month's record level, data showed on Monday.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) dipped to a seasonally adjusted 57.2 in April from 58.5 in March. It was the third highest reading in the 10-1/2-year history of the survey. March's level was the highest.

The index has been above the 50 threshold, which shows growth in the sector, every month since last July.

"Latest PMI data revealed a confident start to Q2," Shreeya Patel, an economist at IHS Markit, said in a statement. "Despite moderating form March's near-survey peaks, output and new order growth were robust."

The measure of output dipped to 55.0 from 57.7 in March, while the new orders index was at 56.9, down from 58.0. Growth in new orders was helped by government stimulus policies, IHS Markit said, pointing to anecdotal evidence.

Last month, Canadian Prime Minister Justin Trudeau's government lined up billions in new spending to provide emergency support during a virulent third wave of COVID-19. (Full Story)

Still, tightening of economic restrictions has weighed on sentiment. It was below the long-run trend level, and together with port congestion has led to another lengthening in supplier delivery times, IHS Markit said.

In addition, the data showed output prices rising at the fastest pace on record. Higher raw material costs and strong demand allowed firms to pass on higher costs during the month, said IHS Markit.

The Bank of Canada said last month that it expects inflation to temporarily rise to about 3% this year.

U.S. manufacturing sector slows in April amid supply challenges - Reuters News

By Lucia Mutikani

WASHINGTON, May 3 (Reuters) - U.S. manufacturing activity grew at a slower pace in April, likely constrained by shortages of inputs amid pent-up demand unleashed by rising vaccinations and massive fiscal stimulus.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity fell to a reading of 60.7 last month after surging to 64.7 in March, which was the highest level since December 1983.

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 65 in April.

The White House's massive $1.9 trillion pandemic relief package and the expansion of the COVID-19 vaccination program to all adult Americans has led to a boom in demand. But the pent-up demand is pushing against supply constraints as the pandemic, now in its second year, has disrupted labor supply, leading to shortages that are boosting prices of inputs.

That has been most evident in the automobile industry, where a global semiconductor chip shortage has forced cuts in production. Ford Motor Co F.N said last week the scarcity of chips slashed production in half in its second quarter.

Technology companies are also feeling the heat. Apple AAPL.O warned last week that the chip shortage could dent iPads and Mac sales by several billion dollars.

Demand for goods like motor vehicles and electronics has surged during the pandemic as Americans shunned public transportation and millions worked from home and took classes remotely. Robust consumer spending helped to lift gross domestic product growth at a 6.4% annualized rate in the first quarter.

Most economists expect double-digit GDP growth this quarter, which would position the economy to achieve growth of at least 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.

The ISM survey's measure of prices paid by manufacturers rose last month to the highest reading since July 2008.

The survey's forward-looking new orders sub-index dropped to 64.3 after racing to 68.0 in March, which was the highest reading since January 2004.

Backlogs of uncompleted work increased last month as did export orders. Manufacturers started drawing down on inventories last month to meet demand. Business warehouses are almost bare, which should keep manufacturers busy and scrambling for resources for a while.

The survey's manufacturing employment gauge fell to 55.1 after shooting up to 59.6 in March, which was the highest reading since February 2018. The index was well below the 61.5 forecast in a poll of economists, with the slowdown in hiring probably due to a scarcity of workers. Companies across many industries are struggling to find workers, even as employment is 8.4 million jobs below its peak in February 2020.

Federal Reserve Chair Jerome Powell last week acknowledged the worker shortage saying "one big factor would be schools aren't open yet, so there's still people who are at home taking care of their children, and would like to be back in the workforce, but can't be yet."

The worker shortage could hurt expectations for another month of blockbuster job growth in April. According to an early Reuters survey of economists, nonfarm payrolls likely increased by 950,000 jobs last month after rising by 916,000 in March.

The government is due to publish April's employment report on Friday.

Euro zone factories raced ahead in April, prices jumped - PMI - Reuters News

By Jonathan Cable

LONDON, May 3 (Reuters) - Euro zone factory activity growth surged to a record high in April, boosted by burgeoning demand and driving a rise in hiring, although supply constraints led to an unprecedented rise in unfulfilled orders, a survey showed.

While a third wave of coronavirus infections in Europe has forced some governments to shutter much of their dominant service industries, factories have largely remained open.

IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) rose to 62.9 in April from March's 62.5, albeit below the initial 63.3 "flash" estimate but the highest reading since the survey began in June 1997.

An index measuring output, which feeds into a composite PMI due on Wednesday and that is seen as a good guide to economic health, edged down from March's record high of 63.3 to 63.2. Anything above 50 indicates growth.

"The euro zone was late out of the gates in terms of its economic rebound but it does seem to be starting. Looking at where we are now the numbers are encouraging," said Bert Colijn at ING.

"It is a foregone conclusion that Q2 will be much stronger than Q1 was."

The backlogs of work index soared to 61.5 from 60.4, a survey high.

French manufacturing growth eased off a little from March's peak as bottlenecks weighed on the recovery but Italian factory activity grew at its fastest rate on record, sister surveys showed. (Full Story) (Full Story)

German factories have been humming along during the pandemic, almost undisturbed by the related lockdowns, and activity accelerated in Europe's biggest economy early this year on strong demand from the United States and China. (Full Story)

Its latest PMI was only just below March's high at 66.4.

China's factory activity growth slowed and missed forecasts as supply bottlenecks and rising costs weighed on production, a survey showed on Friday, while figures due later on Monday are expected to show an acceleration in U.S. factory growth. (Full Story) (Open poll data)

 

COST PRESSURES

With the cost of raw materials rising at a near record pace, factories were forced to raise their own prices at the sharpest pace since IHS Markit began collecting the data.

"There has been an increase in cost pressures, mainly for manufacturers. Inputs ranging from energy prices to commodity prices are rising and shortages in all sorts of parts of the economy are starting to have an impact on prices," Colijn said.

"It does look like that will start to have an impact on goods inflation over the course of this year."

Inflationary pressures might be welcomed by policymakers at the European Central Bank who have not managed to get inflation anywhere near their goal despite ultra-loose monetary policy.

German factories on hiring spree to meet strong demand in April -PMI - Reuters

BERLIN, May 3 (Reuters) - Job creation in Germany's manufacturing sector accelerated in April, a survey showed on Monday, as factories optimistic about strong demand faced growing pressure on production capacity.

IHS Markit's Final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, reached 66.2, slightly lower than a flash reading of 66.4 but still close to March's record high reading of 66.6.

Factories in Europe's biggest economy have been humming along during the pandemic almost undisturbed by the related lockdowns, and activity accelerated early this year on strong demand from the United States and China.

"A second consecutive record increase in backlogs of work underlines the strength of demand faced by German manufacturers, but it also highlights the fact that production continues to lag behind new orders," said Phil Smith, principal economist at IHS Markit.

He added: "The data show that goods producers have redoubled efforts to expand capacity, with April seeing a notable acceleration in the rate of job creation to the fastest in more than two-and-a-half years, but supply issues remain a risk to the sector's growth prospects."

Shortages of raw material and components like chips are creating headwinds for manufacturers, especially those in the automotive industry.

"Despite showing some concerns for the current supply issues, manufacturers generally maintain a strongly positive outlook for the year ahead with expectations at a record high, hinting they believe the bottlenecks to be transitory and that conditions on both the demand and supply side will get better," said Smith.

German retail sales jump in March as lockdown measures ease - Reuters News

BERLIN, May 3 (Reuters) - German retail sales posted their biggest year-on-year increase in March since the start of the COVID-19 pandemic, data showed on Monday, as the relaxation of some lockdown measures boosted purchases of clothes and shoes.

The Federal Statistics Office said retail sales jumped 11.0% compared to the same month a year earlier in real terms after an upwardly revised fall of 6.6% in February. The March reading overshot a Reuters forecast for a decline of 0.3%

Sales of textiles, clothing, shoes and leather goods rose 27.7% compared to the same month a year earlier, while retail trade with goods sold in department stores was up 23%.

Online retailers continued to benefit from shifting consumer habits with sales up 42.9% compared with a year earlier.

German states started allowing shops to offer so-called appointment shopping deals, called "click and meet" in March.