Canadian manufacturing PMI slides to a 6-month low in January - Reuters News

TORONTO, Feb 1 (Reuters) - Canadian factory activity grew at the slowest pace in six months in January, data showed on Monday, highlighting challenges to the economy as restrictions to contain the coronavirus pandemic threaten to slow activity.

The IHS Markit Canada Manufacturing Purchasing Managers' index (PMI) fell to a seasonally adjusted 54.4 in January, its lowest since July, from 57.9 in December but remaining well above the 50 threshold that marks expansion in the sector.

December's reading was the highest level for the PMI since the survey began in October 2010.

"Latest data signalled another month of expansion in the Canadian manufacturing sector," Shreeya Patel, an economist at IHS Markit, said in a statement. "Ongoing restrictions and border closures continue to pose a threat to exports and factory operations."

The new orders index fell to 53.6 from 57.2 in December, while the measure of employment was down to 51.3 from 55.8.

A surge in COVID-19 cases has led to lockdowns in a number of Canadian provinces. The Bank of Canada expects the economy to contract in the first quarter after rebounding sharply since the first wave of the virus in the spring. (Full Story) (Full Story)

Border restrictions and port congestion contributed to delivery times lengthening for the 17th straight month, with the suppliers' delivery times index nudging up to 34.0 from 32.7 in December.

The measure of future output fell to a six-month low of 60.2 from 64.1 but still showing that manufacturers were optimistic about output levels in the year ahead, hoping restrictions would ease.

U.S. manufacturing sector slows; prices paid by factories highest since 2011 - ISM - Reuters News

WASHINGTON, Feb 1 (Reuters) - U.S. manufacturing activity slowed slightly in January, while a measure of prices paid by factories for raw materials and other inputs jumped to its highest level in nearly 10 years, strengthening expectations inflation will perk up this year.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity fell to a reading of 58.7 last month from 60.5 in December. 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 at 60 in January. The ISM revised data going back to 2012.

Manufacturing has been driven by strong demand for goods, like electronics and furniture as 23.7% of the labor force works from home because of the COVID-19 pandemic. But spending on long-lasting manufactured goods fell for a second straight month in December, government data showed on Friday.

With the distribution of vaccines to fight the coronavirus expected to broaden and accelerate, spending on services is likely to pickup by summer. That could see a slowdown in manufacturing activity from current levels.

The ISM's forward-looking new orders sub-index fell to a reading of 61.1 last month from 67.5 in December. Factories also saw a moderation in export orders. Despite the cool off in orders, factories increased hiring last month.

The survey's manufacturing employment gauge rose to 52.6 from 51.7 in December. That raises hope for a rebound in hiring this month after the economy shed jobs in December for the first time in eight months.

But bottlenecks in the supply chain continued driving up costs for manufacturers. The survey's prices paid index jumped to a reading of 82.1 last month, the highest since April 2011, from 77.6 in December.

That supports predictions of a pick-up in inflation in the coming months, though high unemployment could limit manufacturers' ability to raise prices. Employment is still 10 million jobs below the pre-pandemic peak.

IHS MARKIT U.S. MANUFACTURING SECTOR FINAL NEW ORDERS INDEX FOR JANUARY AT 59.9 VS FLASH READING 59.5 AND FINAL DECEMBER 56.5 - Reuters News

 

U.S. construction spending hits record high in December - Reuters News

WASHINGTON, Feb 1 (Reuters) - U.S. construction spending raced to a record high in December as historically low mortgage rates powered outlays on private projects.

The Commerce Department said on Monday that construction spending increased 1.0% to $1.490 trillion, the highest level since the government started tracking the series in 2002. Data for November was revised higher to show construction outlays surging 1.1% instead of 0.9% as previously reported.

Economists polled by Reuters had forecast construction spending would increase 0.9% in December. Construction spending rose 5.7% on a year-on-year basis in December. Construction spending, which accounts for about 4% of gross domestic product, advanced 4.7% in 2020.

Spending on private construction projects rose 1.2%, boosted by investment in single-family homebuilding amid cheaper mortgages and a pandemic-driven migration to suburbs and low-density areas. That followed a 1.5% jump in November.

Spending on residential projects shot up 3.1% after increasing 3.0% in November. But outlays on nonresidential construction like gas and oil well drilling fell 1.7% in December. Still, spending on nonresidential structures rebounded in the fourth quarter after four straight quarterly declines.

Spending on public construction projects gained 0.5%. State and local government outlays rose 0.4%, while federal government spending increased 1.3%.

China's Jan factory activity expands at slowest pace in 7 mths - Caixin PMI - Reuters News

BEIJING, Feb 1 (Reuters) - China's factory activity expanded at the slowest pace in seven months at the start of 2021, weighed down by falling export orders amid a surging global pandemic and rising costs, a business survey showed on Monday.

The slowdown in the manufacturing sector underscores the fragility of the ongoing economic recovery in China, as Beijing grapples with a resurgence of local COVID-19 cases in northern China and navigates rising tensions with Washington and its allies.

The Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) dropped to 51.5 last month, the lowest level since June last year and easing markedly from December's reading of 53.0. The 50-mark separates growth from contraction on a monthly basis. Analysts polled by Reuters had expected a reading of 52.7.

The survey broadly aligned with Beijing's official PMI on Sunday, which showed the recovery in factory activity slowing as COVID-19 cases rose.nL1N2K600C

A sub-index for production in the Caixin/Markit PMI dropped to 52.5 in January, the slowest pace of expansion since April last year, while another sub-index for new orders fell to 52.2, the lowest since June.

In particular, export orders plunged back into contraction in January, ending a five-month growth streak as the surging global pandemic suppressed foreign demand.

China's economy expanded at a faster-than-expected rate of 6.5% in the fourth quarter last year, thanks to the surprisingly resilient export sector, as factories raced to fill overseas orders amid a surging pandemic.

But recovery hopes are being dampened by a sharp increase in COVID-19 cases as authorities race to impose lockdown measures to curb the spread of the virus in the country's north, affecting steel mills and consumer confidence. (Full Story)

"The gauge for future output expectations was the lowest since May last year though it remained in positive territory, showing manufacturing entrepreneurs were still worried about the sustainability of the economic recovery," said Wang Zhe, Senior Economist at Caixin Insight Group.

"In addition, the weakening job market and the sharp increase in inflationary pressure should not be ignored."

Average input costs continued to rise sharply during January, with the rate of inflation only easing slightly from December's three-year high. Respondents reported increased raw material prices and supplier shortages drove up expenses in January.

Factories continued to reduce their headcount at a faster pace in January.

Manufacturers also reported widespread logistics delays as government imposed lockdown measures hit supply chains, leading to a marked increase in delivery times for suppliers.

Euro zone factory recovery faltered in Jan but still strong -PMI - Reuters News

By Jonathan Cable

LONDON, Feb 1 (Reuters) - Euro zone manufacturing growth remained resilient at the start of the year but the pace waned from December as renewed lockdown measures across the continent, alongside supply shortages, hurt activity, a survey showed.

With coronavirus infections soaring again in Europe countries have forced vast swathes of the bloc's dominant service industry to shut their doors, leaving manufacturing to support the economy as factories have largely remained open.

IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) fell to 54.8 in January from December's 55.2, although that was a touch above the initial 54.7 "flash" estimate.

"Euro zone manufacturing output continued to expand at a solid pace at the start of 2021, though growth has weakened to the lowest since the recovery began as new lockdown measures and supply shortages pose further challenges to producers across the region," said Chris Williamson, chief business economist at IHS Markit.

An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good gauge of economic health fell to 54.6 from 56.3, still comfortably above the 50 mark separating growth from contraction.

But with much of the service industry likely to remain closed for some time the bloc's economic outlook remains bleak and it will take up to two years for GDP to reach pre-COVID-19 levels, a Reuters poll found last month. ECILT/EU

Restrictions meant a sub index measuring delivery times sank to 31.6 from 34.4, suggesting factories were struggling to obtain the raw materials they need. The index has only been lower once since the survey began in mid-1997 and that was at the height of the pandemic last year.

"Supply shortages have meanwhile put pricing power in the hands of suppliers, pushing raw material prices sharply higher. Increased shipping costs are adding to the burden," Williamson said.

Despite rocketing input costs factories increased their own prices at a shallower rate than in December.

Still, with hopes the vaccines being rolled out will allow some return to normality, optimism about the year ahead climbed to a three-year high.

Euro zone Dec unemployment stable at 8.3% as expected - Reuters News

BRUSSELS, Feb 1 (Reuters) - Euro zone unemployment was stable at 8.3% of the workforce in December, the European Union's statistics office Eurostat said on Monday, despite continued coronavirus lockdowns in most euro zone countries.

Still, Eurostat said 13.671 million people were out of work in the 19 countries sharing the euro in December, up from 13.616 million in November.

In Belgium, Ireland, Cyprus, Lithuania, the Netherlands, Portugal and Slovakia the number of people unemployed actually fell in December, but it rose slightly in other countries, such as Germany, France and Italy.

To keep unemployment levels down during the pandemic, euro zone countries have been using furlough systems where governments subsidise a portion of wages to help employers keep staff on their payrolls. This prevents layoffs and means production capacity can more easily rebound.

Supply delays threaten German manufacturing prospects- PMI - Reuters

BERLIN, Feb 1 (Reuters) - Increasing supply delays threaten to slow Germany's manufacturing sector, which remained in growth territory in January despite a hard lockdown to quell a second wave of the coronavirus, a survey showed on Monday.

IHS Markit's Final Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, fell to 57.1, higher than a flash reading of 57.0 but lower than December's 58.3 mark.

Factories in Europe's biggest economy have been humming along during the pandemic on higher demand from abroad, giving the economy much needed impetus as the services sector stalls.

Phil Smith, principle economist at IHS Markit, said the immediate impact of supply bottlenecks were rising costs.

"The survey gives some cause for concern regarding the growing incidence of supply delays," said Smith. "Increasing demand for inputs from manufacturers, combined with shortages of materials and shipping containers has created a perfect storm for supply chains, with January's survey indicating a record increase in lead times."

He added: "Whilst any impact on actual production levels seems to have been only limited so far, with output keeping pace with new orders, we are seeing declining levels of inventories at manufacturers, and therefore a growing risk of disruption."

Germany's stricter lockdown sinks retail sales in December - Reuters News

By Michael Nienaber

BERLIN, Feb 1 (Reuters) - German retail sales plunged more than expected in December as a decision to tighten lockdowns to curb the spread of COVID-19 choked consumer spending in Europe's largest economy at the end of the year, data showed on Monday.

Chancellor Angela Merkel and state premiers closed most shops and services from mid-December after a partial lockdown for bars, restaurants and entertainment venues introduced in early November failed to push down infections.

The stricter lockdown, which included schools and kindergartens but excluded factories and offices, has been extended until mid-February.

The Federal Statistics Office said retail sales fell by an unprecedented 9.6% on the month in real terms after a downwardly revised increase of 1.1% in November.

This undershot a Reuters forecast for a drop of 2.6% and marked the steepest monthly drop since records began in 1994, the office said. December is usually the best month for German retailers.

"The containment measures left massive scars in December. Compared to November, sales dropped by an alarming extent," VP Bank analyst Thomas Gitzel said.

On the year, retail sales - a notoriously volatile indicator often subject to revisions - rose 1.5% in real terms following a downwardly revised increase of 5% in November.

 

ONLINE SALES BENEFIT

For 2020 as a whole, retail sales jumped by 3.9% on the year in real terms, the office said. That was slightly below a previous estimate of 4.1% but still marked the highest annual increase on record.

Online retailers continued to benefit from shifting consumer habits with a strong jump in sales. That came at the expense of clothing and shoe stores ,which continued to suffer.

The HDE retail association has warned that up to 50,000 shops are facing bankruptcy because of the lockdown and the broader shift towards online retailing.

The weaker-than-expect retail sales data followed a consumer sentiment survey by GfK research group last week, which showed that German consumer morale fell a fourth month in a row heading into February as the stricter lockdown kept people from going shopping. (Full Story)

The Ifo economic institute said on Monday that the number of workers on reduced hours as part of the 'Kurzarbeit' job protection scheme rose by almost 20% to 2.6 million in January as a result of the stricter lockdown. (Full Story)

Germany's uneven lockdown has created a two-speed economy in which export-oriented manufacturers are doing well while domestically driven services are suffering.

"Since the lockdown is likely to continue for some time, a significant improvement cannot be expected for the time being," Commerzbank economist Ralph Solveen said, adding the economy was likely to shrink significantly in the first quarter of 2021.

Robust exports and construction activity helped the economy eke out 0.1% growth in the final quarter of last year despite the phased lockdown. (Full Story)

A survey by IHS Markit among purchasing managers showed on Monday that increasing supply delays threaten to slow Germany's manufacturing. It nonetheless remained in growth territory in January despite the harder lockdown.