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145 matches for " equipment":
We are intrigued by the idea that the rollover in oil firms' capital spending on equipment might already be over, even as spending on new well-drilling--captured by the still-falling weekly operating rigs data--continues to decline. The evidence to suggest equipment spending has fallen far enough is straightforward.
Capex data by industry are available only on an annual basis, with a very long lag, so we can't directly observe the impact the collapse in the oil sector has had on total equipment spending. But we can make the simple observation that orders for non-defense capital goods were rising strongly and quite steadily-- allowing for the considerable noise in the data--from mid-2013 through mid-2014, before crashing by 9% between their September peak and the February low. It cannot be a coincidence that this followed a 55% plunge in oil prices.
The nominal value of orders for non-defense capital equipment, excluding aircraft, fell by 3.4% last year. This was less terrible than 2015, when orders plunged by 8.4%, but both years were grim when compared to the average 7.5% increase over the previous five years.
Total real inventories rose at a $48.7B annualized rate in the fourth quarter, contributing 1.0 percentage points to headline GDP growth. Wholesale durable goods accounted for $34B of the aggregate increase, following startling 1.0% month-to-month nominal increases in both November and December. The November jump was lead by a 3.2% leap in the auto sector, but inventories rose sharply across a broad and diverse range of other durables, including lumber, professional equipment, electricals and miscellaneous.
Data released yesterday showed that gross fixed investment in Mexico started Q4 on a decent note, increasing on the back of healthy purchases of imported machinery and equipment and construction spending.
French manufacturing cooled at the end of 2016. Industrial production slipped 0.9% month-to-month in December, partially reversing an upwardly revised 2.4% jump in November. The main hits came from declines in oil refining and manufacturing of cars and other transport equipment.
Chief U.S. Economist Ian Shepherdson discussing Durable Goods Orders in May
The last time oil prices fell sharply, from mid-2014, when WTI peaked at $107, through early 2016, when the price reached just $26, the U.S. economy slowed dramatically.
This week's detailed Q1 GDP data confirmed that the German economy is in dire straits, alongside its euro area peers, but there's a silver lining.
India's government imposed a three-week nationwide lockdown on March 25 to combat the increasingly rapid spread of Covid-19.
Yesterday's IFO data reversed the good vibes sent by last week's upbeat German PMIs.
Brazilian financial assets lately appear to be responding only to developments in the presidential election race and external jitters.
Yesterday's barrage of French business sentiment data was mixed.
The Covid-19 scare can be split into two stages, the initial outbreak in China, concentrated in Wuhan, and the now-worrying signs that clusters are forming in other parts of the world, primarily in South Korea, the Middle East and Italy.
Orders for non-defense capital goods, excluding aircraft, have risen in six of the past seven months. In the fourth quarter, orders rose at a 4.7% annualized rate, in contrast to the 5.3% year-over-year plunge in the first half of the year.
Judging by the survey data, German business sentiment remained depressed at the start of the year.
The Fed will do nothing to the funds rate or its balance sheet expansion program today.
We have to hand it to Italy's politicians. In an economy with a current account surplus of 3% of GDP, a nearly balanced net foreign asset position and with the majority of government debt held by domestic investors, the leading parties have managed to prompt markets to flatten the yield curve via a jump in shortterm interest rates.
Net foreign trade was a drag on GDP growth in the second quarter, subtracting 0.7 percentage points from the headline number.
French consumers remained in great spirits midway through the fourth quarter. The headline INSEE consumer confidence index jumped to a 28-month high in November, from 104 in October, extending its v-shaped recovery from last year's plunge on the back of the yellow vest protests.
Economic news in the Eurozone, and virtually everywhere else, has been mostly downbeat in the past few months, but French consumers are doing great.
We covered the detailed German Q1 GDP report in Friday's Monitor--see here--but the investment data could do with closer inspection. The headline numbers looked great.
Core durable goods orders in recent months have been much less terrible than implied by both the ISM and Markit manufacturing surveys.
need to add docMea culpa: We failed to spot the press release from the Commerce Department announcing the delay of the release of the advance December trade and inventory data, due to the government shutdown.
The huge drop in the March Markit services PMI, reported yesterday, and the modest dip in the manufacturing index, are the first national business survey data to capture the impact of the Covid-19 outbreak.
The commentariat was very excited Friday by the inversion of the curve, with three-year yields dipping to 2.24% while three-month bills yield 2.45%.
Yesterday's economic data in Germany confirmed that the economy slowed in Q3, but also added to the evidence that growth will rebound in Q4. The second estimate for Q3 showed that real GDP rose 0.2% quarter-on-quarter, slowing from a 0.4% gain in Q2.
The IFO continues to tell a story of a German economy on the ropes.
The latest data from container ports around the country are consistent with our view that imports are still correcting after the surge late last year, triggered by the hurricanes.
The apparent softness of business capex is worrying the Fed.
Last week's data added yet more weight to our view that manufacturing is in deep trouble, and that the bottom has not yet been reached.
The gaps in the third quarter GDP data are still quite large, with no numbers yet for September international trade or the public sector, but we're now thinking that growth likely was less than 11⁄2%.
Fed Chair Yellen set out a robust and detailed defense of the orthodox approach to monetary policy in her speech in Amherst, MA, yesterday afternoon. Her core argument could have come straight from the textbook: As the labor market tightens, cost pressures will build. Monetary policy operates with a "substantial" lag, so waiting too long is dangerous; the "...prudent strategy is to begin tightening in a timely fashion and at a gradual pace".
I need to ask your indulgence today, because the release of the durable goods and advance international trade reports coincides with my elder daughter's college graduation ceremony.
The INSEE's manufacturing sentiment data in France are slightly confusing at the moment.
Data released last week confirm that the Argentinian economy was resilient at the start of the year, but downside risks to growth have increased.
The newly-revised data on capital goods orders, released on Friday, support our view that sustained strength in business capex remains a good bet for this year.
Yesterday's IFO survey in Germany was a nasty downside surprise for markets. The business climate index slipped to 106.2 in August, from 108.3 in July, well below the consensus forecast for a modest rise. In addition, the expectations index slid ominously to 100.1, from a revised 102.1 in July.
The German economy finished last year on the back foot.
The November IFO report suggests that the headline indices are on track for a tepid recovery in Q4 as a whole, but the central message is still one of downside risks to growth
Producer price inflation in the euro area almost surely peaked over the summer.
Yesterday's detailed EZ GDP report showed that real output rose 0.3% quarter-on-quarter in Q3, the same pace as in Q2. The year-over-over rate rose marginally to 1.7% from 1.6%, trivially higher than the first estimate, 1.6%. The details showed that consumers' spending and public consumption were the key drivers of growth in Q3, offsetting a slowdown in net trade.
German manufacturing is in good shape, but probably is not as strong as implied by yesterday's surge in new orders. Factory orders jumped 5.2% month-to-month in December, rebounding strongly after a downwardly revised 3.6% fall in November. December's jump was the biggest monthly increase in two years, but it was flattered by a leap in bulk investment goods orders, mainly in the domestic market and other EZ economies.
Yesterday's economic reports in the Eurozone were mostly positive.
Manufacturing orders in Germany recovered some ground in the middle of Q1, following the plunge at the beginning of the year. Factory orders rose 3.4% in February, pushing the year-over-year rate up to +4.6% from a revised 0.0% in January.
The EZ retail sector slowed at the start of Q3, though only slightly.
Chile's IMACEC economic activity index rose 2.4% year-over-year in January, down from 2.6% in December, and 3.3% on average in Q4, thanks mostly to weak mining production.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
If you had asked us in the spring where the action would be in capital spending over the summer, we would have said that the housing component was the best bet. Right now, though, the opposite seems more likely, with housing likely to be the weakest component of capex.
Industrial production in Germany stumbled at the end of Q4. Data yesterday showed that output fell 0.6 month-to-month in December, though this drop has to be seen in light of the downwardly-revised 3.1% jump in November.
Friday's industrial production data in Germany added to the manufacturing optimism following the sharp rise in new orders--see here--reported earlier in the week.
Chile's inflation outlook remains benign, allowing policymakers to cut interest rates if the economic recovery falters.
The recovery in small business sentiment since the fourth quarter rollover has been extremely modest, so far.
Yesterday's manufacturing data in Germany were poor, but not as weak as implied by the headline.
Colombia was the fastest growing LatAm economy in 2019, due mostly to strong domestic demand, offsetting a sharp fall in key exports.
Headline inflation in Brazil remained low in October, and even breached the lower bound of the BCB's target range.
Demand in German manufacturing rebounded strongly midway through the second quarter.
Services will bear the brunt of the Covid-19 shock in the euro area, but manufacturing is not far behind.
Yesterday's economic news in the French economy was solid.
Yesterday's FOMC , announcing a unanimous vote for no change in the funds rate, is almost identical to December's.
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
The rate of growth of new coronavirus infections across Europe slowed yesterday, in some cases quite markedly. We can quibble about the reliability of the data in individual countries, given variations in testing regimes, but the picture is strikingly uniform.
Yesterday's sole economic report in the Eurozone confirmed that the economy slowed further at the end of 2018.
Yesterday's final manufacturing PMIs confirmed that the headline index in the euro area rebounded further last month.
The first economic report of 2020 confirmed the main story in the euro area last year; namely a recession in manufacturing.
Yesterday's advance Eurozone Q4 GDP report conformed to expectations. Headline GDP increased 0.6% quarter-on-quarter, slowing trivially from an upwardly-revised 0.7% rise in Q3, and nudging the year-over-year rate down marginally to 2.7%.
The near-term performance for EZ manufacturing will be a tug-of-war between positive technical factors, and a still-poor fundamental outlook.
Brazil's key data flow started Q4 on a soft note, but we still believe that the economic recovery will gather strength over the next three-to-six months.
The majority of headlines from last week's advance Q4 GDP data in the Eurozone--see here--were negative.
We were worried about downside risk to yesterday's ADP employment measure, but the 67K increase in November private payrolls was at the very bottom of our expected range.
We have been telling an upbeat story about the EZ economy in recent Monitors, emphasizing solid services and consumers' spending data.
The most positive thing to say about the EZ manufacturing PMI at the moment is that it has stopped falling.
Eurozone manufacturing boosted GDP growth in the first half of the year, and survey data suggest that momentum will be maintained in Q3.
Data released this week have confirmed that the Mexican economy is struggling and that the near-term outlook remains extremely challenging.
Yesterday's barrage of survey data in France suggests that business sentiment in the industrial sector remained soft mid-way through Q4, but the numbers are more uncertain than usual this month.
The euro area economy continues to defy rising political uncertainty. Data yesterday showed that industrial production, ex-construction, in the Eurozone jumped 1.5% month-to-month in November, pushing the year-over-year rate up to 3.2% from a revised 0.8% in October. Output rose in all the major economies, but the headline was flattered by a 16.3% month-to-month leap in Ireland. This was due to a production jump in Ireland's "modern sector" which includes the country's large multinational technology sector.
Last week's detailed GDP data in the Eurozone confirmed that the economy is benefiting from an investment cycle for the first time since before the financial crisis.
The fact that Italy's economy is in poor shape will not surprise anyone following the euro area, but the advance Q4 GDP headline was astonishingly poor all the same.
To the extent that markets bother with the NFIB survey at all, most of the attention falls on the labor market numbers. But these data--hiring, compensation, jobs hard-to-fill--haven't changed much in recent months, and in any event most of them are released the week before the main survey, which appeared yesterday. The message from the labor data is unambiguous: Hiring remains very strong, employers are finding it very difficult to fill open positions, and compensation costs are accelerating.
Yesterday's industrial production report in Mexico added weight to the idea that the sector improved marginally in the first quarter, despite many external threats. Industrial output rose 0.1% month-to-month in February, following a similar gain in January. The calendar-adjusted year-over-year rate rose to -0.1%, after a modest 0.3% contraction in January.
The combination of astounding fourth quarter payroll numbers and weak GDP growth has prompted a good deal of bemused head-scratching among investors and the commentariat. The contrast is startling, with Q4 private payrolls averaging 276K, a 2.4% annualized rate of increase, while the initial estimate for growth seems likely close to 1%. Even on a year-over-year basis, stepping back from the quarterly noise, Q4 growth is likely to be only 2% or so.
More depressing economic numbers in LatAm have been released in recent days, and high frequency data continue to show a near-term bleak outlook.
The political situation in Spain remains an odd example of how complete gridlock can be a source of relative stability.
Yesterday's data provided further evidence of the damage wrought on the EZ at the end of Q1.
The Eurozone economy was resilient at the end of last year, but yesterday's reports indicated that growth was less buoyant than markets expected. Real GDP in the euro area rose 0.4% quarter-on-quarter in Q4, the same pace as in Q3, but slightly less than the initial estimate 0.5%.
Barring a meteor strike, the ECB will leave its main refinancing and deposit rates unchanged today, at 0.00% and -0.5% respectively.
It was no surprise that Banxico cut its policy rate by 25bp to 7.00% yesterday, following similar moves in August, September, November and December.
Brazil's retail sales data undershot consensus in August, falling by 0.5% after four straight gains. But we think this merely a temporary softening, following the strong performance in recent months.
The manufacturing sector likely was the primary driver of Q3 GDP growth in the Eurozone. Data yesterday showed that industrial production rose 1.4% month-to-month in August, pushing the year-over-year rate up to 3.8%, from a revised 3.6% in July.
Manufacturing in France rebounded only modestly at the start of Q3, despite favourable base effects.
China's PPI deflation deepened in August, with prices dropping 0.8% year-over-year, after a 0.3% decline in July.
Chinese PPI inflation fell to 4.9% in December, from 5.8% in November. The decline was expected, but underneath the slowdown in commodity price inflation, the rate of increase of manufacturing goods prices is slowing sharply too.
Momentum in French manufacturing eased slightly in November, but the setback was modest. Industrial production dipped 0.5% month-to-month, only partially reversing the revised 1.7% jump in October.
Mexico's latest forward-looking indicators are showing tentative signs of stabilisation in the wake of recent evidence that growth slowed quicker than markets have been expecting.
Manufacturing in France remained on the front foot at the start of Q4.
Britain is indisputably beyond the peak of the first wave of Covid-19 infections, though the descent in new cases, hospitalisations and deaths has been shallower than the ascent.
The ECB made no changes to its policy stance yesterday.
Economic data in the euro area are still slipping and sliding.
Yesterday's manufacturing data in France were in stark contrast to last week's upbeat German numbers.
Friday's data force us to walk back our recession call for Germany. The seasonally adjusted trade surplus rose in September, to €19.2B from €18.7B in August, lifted by a 1.5% month-to-month jump in exports, and the previous months' numbers were revised up significantly.
Yesterday's economic reports in the Eurozone were ugly.
This week's data confirmed Mexico's strong economic performance over the first few months of this year.
We already know that the key labor market numbers in today's May NFIB survey are strong.
France is solidifying its position as one of the Eurozone's best-performing economies.
The weekly jobless claims numbers are due Thursday, as usual, but in the wake of a flood of emails from readers, all asking a variant of the same question-- should we be worried about the rise in continuing jobless claims?--we want to address the issue now.
Inflation in Brazil Ended 2019 Above the BCB's Target; 2020 will be Fine
Japan's trade balance deteriorated sharply in May, flipping to a ¥967B deficit from the modest ¥57B surplus in April.
The euro area's trade advantage with the rest of the world slipped at the start of the year.
Upbeat survey data, a competitive MXN, and the strong U.S. manufacturing sector indicate that Mexican industry should be rebounding.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
Yesterday's final May manufacturing PMIs confirmed that the EZ industrial sector is in fine form. The PMI for the euro area was unchanged at a cyclical high of 57.0 in May, in line with the initial estimate.
Japan's labour data threw another January curve ball this year--last year it was wages--with a change in the standards for job openings.
Chile's Q2 GDP report, released yesterday, confirmed that the economy gathered strength in the first half of the year, consolidating a strong recovery that started in Q3 2017.
Yesterday's final CPI report for April confirmed that the Eurozone is edging towards deflation.
The Spanish economy has been living a quiet life recently, amid markets' focus on political risks in Italy and manufacturing slowdowns in Germany and France.
The Conference Board's index of leading economic indicators appears to signal that the U.S. economy is plunging headlong into recession.
Unlike other central banks, the MPC has stuck to its message that "an ongoing tightening of monetary policy over the forecast period" likely will be required to keep inflation close to the 2% target, provided a no-deal Brexit is avoided.
Yesterday's barrage of French business sentiment data suggest that confidence in the industrial sector was a little stronger than expected in Q2.
As we reach our Sunday afternoon deadline, no deal has been reached to re-open the federal government.
The key detail in Friday's barrage of economic data was the above-consensus increase in EZ inflation.
Halfway through the third quarter, we have no objection to the idea that GDP growth likely will exceed 2% for the third straight quarter.
A strong finish to the fourth quarter spared the EZ auto sector the embarrassment of posting an outright fall in domestic sales through 2019 as a whole.
The latest survey evidence strongly supports our view that momentum is building in the industrial economy, but the official production data continue to lag. Yesterday's March Philly Fed survey was remarkably strong, with the correction in the headline sentiment index -- inevitable, after February's 33-year high -- masking increases in all the subindexes.
We had expected the batch of Chinese data released at the end of last week to disappoint.
President Trump wrote to Congress on Monday, saying that the U.S. finally has reached a trade deal with Japan, about a month after he and Prime Minister Abe announced an agreement in principle, on the sidelines of the G7 Summit in France.
Industrial production bounced back in February. These data point to a reprieve for old-guard dirty industry, after stringent anti-pollution curbs were put in place in Q4.
Judging by the solid advance data in the major economies, yesterday's EZ industrial production report should have hit desks with a bang, but it was a whimper in the end.
Evidence of slowing growth in Brazil consumers' spending continues to mount.
Last week's hard data in Colombia were upbeat, confirming that economic growth accelerated in the first half. Retail sales rose 5.9% year-over-year in May, overshooting consensus.
Italy's economy is still bumping along the bottom, after emerging from recession in the middle of last year.
The February activity report in Colombia showed a modest pick-up in manufacturing activity and strength in the retail sales numbers.
We doubt that this week will see the MPC joining the list of other major central banks that have abandoned plans to raise interest rates this year.
Yesterday's sole economic report showed that the EZ trade surplus rebounded slightly at the start of the year, rising to €17.0B in January, from a revised €16.0B in February, lifted by a 0.8% increase in exports, which offset a 0.3% rise in imports.
May's activity data underline the weakness of Colombia's economic growth. Domestic demand still is under pressure due to the lagged effect of the deterioration in the terms of trade and other temporary shocks in 2016, and the VAT increase in January this year.
Yesterday's ECB bank lending survey suggests that credit conditions remain favourable for the EZ economy. Credit standards eased slightly for business and mortgage lending and were unchanged for consumer credit.
The combination of weather effects and the meltdown in the oil sector make it very hard to spot the underlying trend in manufacturing activity. The sudden collapse in oil-related capital spending likely is holding down production of equipment, but the data don't provide sufficient detail to identify the hit with any precision.
French industrial production data offered a bit of relief last week following a string of woeful German data, and news of monthly falls in Italian and Spanish manufacturing output. Industrial production jumped 1.6% month-to-month in August, but the headline was flattered by a 0.3% downward revision of the July data. The monthly jump pushed the year-over-year rate higher to 1.6%, from a revised 0.9% fall in July. All sectors performed strongly in August, but the key story was a hefty increase in transport equipment manufacturing, due to a 11.9% surge in vehicle production.
French industrial production data surprised to the upside yesterday. Output rose 0.1% month-to-month in September, a solid gain following an upwardly-revised 1.7% rise in August, and also higher than the consensus, forecast for a 0.4% fall. The details, however, were less upbeat than the headline. Transport equipment fell, as expected, following production being pushed forward ahead of the Summer holidays. But this story was overshadowed by a 22.5% month-to-month jump in oil refining-- included in manufacturing--as refineries resumed full production following maintenance over the summer.
Consumption and investment spending by state and local government accounts for just over 10% of the U.S. economy, making it more important than exports or consumers' spending on durable goods, and roughly equal to all business investment in equipment and intellectual property.
We argued in the Monitor yesterday that the plunge in capital spending on equipment in the oil sector could cost about 300K jobs over the course of this year. Adding in the potential hit from falling spending on structures, which likely will occur over a longer period, given the lead times in the construction process, the payroll hit this year could easily be 500K, or just over 40K per month.
French manufacturers recovered their optimism towards the end of Q3. The headline INSEE manufacturing sentiment index rose to 103 in September, from 101 in August, and the composite business confidence gauge also increased. A rebound in transport equipment firms' own production expectations was the key driver of the recovery.
We're pretty sure our forecast of a levelling-off in capital spending in the oil sector will prove correct. Unless you think the U.S. oil business is going to disappear, capex has fallen so far already that it must now be approaching the incompressible minimum required for replacement parts and equipment needed to keep production going.
If we had known back in June 2014 that oil prices would drop to about $30, the collapse in capital spending in the oil sector would not have been a surprise. Spending on well-drilling, which accounts for about three quarters of oil capex, has dropped in line with the fall in prices, after a short lag, as our first chart shows. We think spending on equipment has tracked the fall in oil prices, too.
Are there any signs that the U.S. tax cuts and/or regulatory relaxation are stimulating increased non-residential fixed investment?
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