Finance Matters

Posts Tagged ‘index’

The Chartered Institute of Purchasing and Supply (CIPS)/Markit manufacturing purchasing managers’ index (PMI) has today revealed UK manufacturing activity contracted last month.

The closely-watched CIPS/Markit manufacturing PMI sank to 47.4 in October from September’s reading of 50.8.

Today’s survey means the index has fallen below the crucial 50 mark – which separates growth from expansion.

Furthermore, the index is now at its lowest level since June 2009 – when the economy was still in recession – and suggests a weak start to the final quarter of 2011.

Chris Williamson, chief economist at Markit, said there is a “significant risk” of the economy contracting in the fourth quarter and this follows similar observations made last week by Martin Weale and Paul Fisher, who are both members of the Bank of England’s Monetary Policy Committee.

The manufacturing sector accounts for around 13% of economic output.

Construction activity and service sector activity figures will be published later this week.

In other news today, the Office for National Statistics (ONS) revealed the UK economy expanded by a better-than-expected 0.5% in the July to September period.

This compares with a 0.1% growth rate for the second quarter and was better than the 0.3% expected by most economists.

The better performance was attributed to production sector output, which rose 0.5% in the three month period, versus a 1.2% decline in the previous quarter.

Meanwhile, business services and finance were the biggest contributor to overall growth in the period, expanding by 0.8%, the Office for National Statistics said.

However, the better than expected figures should not be regarded as an economic rebound since it compares with a second quarter which was hit by “special factors” such as the Royal Wedding and Japanese tsunami which trimmed as much as 0.5 percentage points from quarterly growth, analysts’ said.

Analysts also point out that the third quarter growth was still weak, at just 0.5%, and the outlook remains bleak.

US consumer confidence slumped in October, the Conference Board has reported.

The closely-monitored Consumer Confidence Index from the Conference Board dived to 39.8 this month from September’s reading of 46.4.

Not only was the reading less than forecasts of a level of 46.0, it was the lowest since March 2009, when the US was in recession.

Furthermore, the index remains far away from the 90 points required to show that the world’s largest economy is on solid footing.

Since the index commenced in 1967, the average reading has been 95.6.

The index hit a record high of 144.7 in 2000, while its all-time low was 25.3 in February 2009, when the country was in the midst of recession.

Commenting on the figures, Lynn Franco, director of the Conference Board Consumer Research Centre said: “Consumer confidence is now back to levels last seen during the 2008-2009 recession.

“Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased,” she added.

Meanwhile, the present situation index, a measure of consumers’ assessment of current economic conditions, fell for the sixth month in a row to 26.3 from a revised 33.3 in September.

The report also showed that households are concerned about future incomes – raising doubt over spending – something which is closely monitored as it accounts for more than two-thirds of economic output.

The economic recovery in the US remains sluggish in the face of higher unemployment and a depressed housing market.

In other news this week, the Standard & Poor’s/Case-Shiller index showed that single-family house prices rose by just 0.2% in August on a monthly basis, while prices were 3.8% lower when compared with August 2010.

The Chartered Institute of Purchasing and Supply (CIPS)/Markit manufacturing purchasing managers’ index (PMI) has today revealed UK manufacturing activity bounced back last month.

The closely-watched CIPS/Markit manufacturing PMI rose to 51.1 in September from August’s reading of 49.4.

Activity has contracted for the last three months and today’s survey means the index has moved back above the crucial 50 mark – which separates growth from expansion.

The reading was also better than forecasts of 48.6.

The pick-up means the Bank of England is likely to keep interest rates on hold at the historic low of 0.5% when its rate-setting committee meets later this week.

However, Markit revealed that new export orders contracted at the fastest rate since May 2009, while employment fell for the third consecutive month.

Commenting on the figures, Markit economist Rob Dobson, said: “The modest return to growth of UK manufacturing output in September is a positive, but it is hard to escape the fact that the sector’s performance has weakened substantially since the opening quarter’s growth surge.

“The data suggests that the positive contribution of manufacturing to the broader economic recovery is likely to remain modest, at best, through the remainder of the year.”

The manufacturing sector accounts for around 13% of economic output.

Construction activity and service sector activity figures will be published later this week.

In other news today, it emerged that manufacturing in the euro zone contracted at the quickest pace in two years last month.

Markit’s PMI fell to 48.5 in September from August’s reading of 49 – meaning the index is below the crucial 50 level.

The news comes as the 17-member nation struggles with the debt crisis and shares have fallen this morning as fears grow that Greece will be unable to avoid defaulting on its debts.

Manufacturing activity in Greece contracted for the 25th consecutive month, Markit said, while powerhouse Germany, also saw activity grind to a halt.

The Munich-based Ifo think tank has today revealed confidence among German firms fell for the third consecutive month in September.

The closely-watched Business Climate Index dipped to 107.5 this month from August’s reading of 108.7 – this represented the lowest level since June 2010.

However, the fall was not as bad as the 106.5 economists had expected.

The fall was attributed to the ongoing debt crisis in the euro zone which could impact on the wider economy.

Ifo surveys around 7,000 German manufacturing, construction, wholesale and retail companies each month.

Commenting on the data, Ifo President Hans-Werner Sinn said: “The business expectations for the coming half year once more deteriorated markedly.”

However, one analyst said the figures suggest that Germany will not fall into a recession.

Meanwhile, a sub-index on expectations also edged lower to 117.9 from 118.1 in August – but again this was less than forecast.

Germany, which has been regarded as Europe’s powerhouse, has been driving the recovery of the euro zone but a recent slew of weak data has forced many to re-evaluate its assessment of the economy.

Statistics office Destatis recently revealed German exports fell more than expected in July.

According to Destatis, exports fell by 1.8% in July on a monthly basis compared with a 1.2% drop in June. Economists had forecast a 0.1% fall for the month.

The sharp fall in exports will be of grave concern for the country’s Government. Export demand helped to bring Germany out of recession in the second quarter of 2009 – much sooner than many of its counterparts throughout the world.

Last week, the European Commission slashed its growth forecasts for the euro zone and warned that the 17-member nation may come “close to standstill at year-end.”

Furthermore, the Washington-based International Monetary Fund recently lowered its growth forecasts for both Germany and the euro zone this year and next.

It expects Germany’s economy to grow 2.7% this year and 1.3% in 2012.

The Zew economic sentiment index has revealed German analyst and investor confidence fell to a 2½ year low in September as the ongoing euro zone debt crisis and fears of a global slowdown dampened sentiment.

The index, which measures expectations of economic activity over the next six months, fell for the seventh consecutive month to -43.3 from August’s reading of -37.6, representing the lowest level since December 2008.

The figure was worse than forecasts of a drop to -44.1 and is way below the historical average of 26.5.

Zew also said its gauge of current conditions fell to 43.6 in September – the lowest since July 2010.

A level above 0.0 indicates optimism, while a level below 0.0 indicates pessimism.

Meanwhile, economic sentiment in the euro zone also fell more than forecast to -44.6 from -40.0 in August. Economists had expected this index to fall to -42.5.

Commenting on the report, Zew President Wolfgang Franz said, “The downward trend of economic perspectives is losing momentum this month. However, the economic outlook is characterised by a high degree of insecurity, which according to the financial market experts undermines investor and consumer sentiment.”

Earlier this month, the Paris-based Organisation for Economic Cooperation and Development (OECD) revised its growth forecasts for Germany, which is the euro zone’s largest economy.

Germany, which has been regarded as Europe’s powerhouse, is expected to contract by 1.4% in the fourth quarter on an annual basis.

Germany has been driving the recovery of the euro zone but a recent slew of weak data has forced many to re-evaluate its assessment of the economy.

Statistics office Destatis recently revealed German exports fell more than expected in July.

According to Destatis, exports fell by 1.8% in July on a monthly basis compared with a 1.2% drop in June. Economists had forecast a 0.1% fall for the month.

The sharp fall in exports will be of grave concern for the country’s Government. Export demand helped to bring Germany out of recession in the second quarter of 2009 – much sooner than many of its counterparts throughout the world.