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International News Part III

China : CFLP Manufacturing PMI

  • May CFLP manufacturing PMI slid to a reading of 50.4 from April's reading of 53.3. This was below analysts' expectations of 52.0. It was the sixth consecutive month above the 50 breakeven point signifying growth, albeit at a slower pace.

    A separate PMI compiled by HSBC Holdings and Markit Economics showed last week that manufacturing may have contracted for a sixth month in May, according to preliminary results. The final reading of the survey, which has a different sample and methodology, is due later today.

United States : Motor Vehicle Sales

  • The number of vehicles sold in May fell a sizable 4 percent from April to an annual rate of 13.8 million which is the lowest rate of the year. Weakness is centered in cars which on average cost less than trucks and which should help limit the monthly effect on the government's retail sales report which is measured in dollars. Still, May is a disappointment especially given industry and press reports that the month's sales were strong.
  • Market Consensus before announcement
    Sales of total light motor vehicles were steady in April compared to March. Sales came in at a 14.4 million annual rate, unchanged from the pace in March. But at more precise decision precision, April was 14.419 million units versus 14.369 million in March, resulting in a 0.3 percent gain. The breakdown showed slight strength on the truck side and slight slowing for cars.

United States : Monster Employment Index

  • The Monster employment index rose 1 point in May to 147. Year-on-year, the index is up 4 points. Online recruiting is heaviest in transportation & warehousing with finance & insurance gaining momentum. On the downside are education and public administration.

Germany : PMI Manufacturing Index

  • The final report for May confirmed the picture of a weak manufacturing sector painted in the flash survey. At just 45.2, the headline index was revised only 0.2 points higher and still stands a point short of its final reading in April. The report implies the sharpest deterioration in business activity since June 2009.

    Output fell for the second month running and at its steepest rate since June 2009. New orders also continued to decline and at their fastest pace in six months, including an accelerated drop in exports. Not surprisingly, backlogs extended their trend decline that started in the middle of last year and headcount was off for the second consecutive month and more sharply than at any time since February 2010. Meanwhile, input inflation hit its lowest level in five months.

    The minor revision to the flash leaves manufacturing shaping up for a decidedly sluggish second quarter.

European Union : PMI Manufacturing Index

  • At 45.1, the final manufacturing PMI for May was just a tick up on its flash estimate and so still suggests that the Eurozone's goods producing sector was again suffering last month. Not only was the headline index worryingly far beneath the key 50 growth threshold, but it was also at its lowest level in some 35 months.

    Output declined at its fastest pace since June 2009 and another sharp fall in new orders together with a further drop in backlogs suggests strongly that there is more of the same to come. Employment also predictably declined again.

    For the core economies, the German index fell a further point to a 35-month low of 45.2 while the French index performed even worse, shedding more than 2 points to just 44.7. Italy managed a small rise but at only 44.7, remained far enough below 50 as makes no difference and Spain was weaker still, down another 1.5 points to 42.0, a 36-month low and now even beneath Greece (43.1).

    The first quarter manufacturing PMI did not fare well in calling the flash Eurozone GDP print but its extended decline into this quarter must be a concern. Particularly worrying is the apparent on-going deterioration in the France and Germany which, if accurate, suggests that the notion of economic stabilisation in the region as a whole is well wide of the mark.

Italy : Unemployment Rate

  • Joblessness rose sharply in the first quarter of 2012, the unemployment rate jumping some 0.7 percentage points to 9.8 percent from a higher revised fourth quarter base. The rate was fully 1.8 percentage points higher on the year.

    Business surveys have signalled a further deterioration in labour market conditions this quarter and, indeed, the monthly data reported an increase to a 10.2 percent rate in April. Unemployment continues to be a major issue for the Italian government and similarly an important reason why financial markets still doubt the ability of the current administration to implement its austerity programme.

Great Britain : CIPS/PMI Manufacturing Index

  • The manufacturing PMI fell much more sharply than expected in May, losing some 4.3 points from a slightly softer revised April reading to 45.9, its lowest level since May 2009.

    The first contraction in production in six months reflected both a weaker global economy and a subdued domestic market. Indeed, the PMI's May decline was the second steepest on record and output would no doubt have fallen yet further but for another sizeable reduction in backlogs. New orders dropped at their fastest pace since March 2009 with exports falling for the second month in a row.

    Job losses were reported for the first time in five months while inflationary pressures eased with rises in both input costs and factory gate prices slowing over the month.

    In the absence of a significant bounce in June manufacturing production looks likely to be a drag on whole economy output this quarter. As such, today's survey results will be seen as boosting the likelihood of more QE from the BoE and sooner rather than later.

European Union : Unemployment Rate

  • Joblessness across the region rose a further 110,000 in April, lifting the number of people out of work to 17.4 million but leaving the unemployment rate unchanged at March's upwardly revised 11.0 percent. In March joblessness was up 133,000.

    As usual the headline data would have looked a good deal worse but for Germany where the unemployment rate edged down a notch to 5.4 percent. By contrast, France and Italy both saw a 0.1 percentage point rise to 10.2 percent while Spain posted a 0.2 percentage point increase to 24.3 percent and now stands within touching distance of the all-time high seen eight years ago. The Portuguese rate was a tick higher at 15.2 percent but Ireland bucked the trend by registering a 0.2 percentage point drop to 14.2 percent, its fourth consecutive monthly decline.

    Business surveys all point to a further increase in the region's joblessness over coming months.

United States : Employment Situation

  • The May employment report shows the economy slowing sharply. The unemployment rate rose to 8.2 percent in May from 8.1 percent the prior month. Payroll jobs in May rose only 69,000, following increases of 77,000 in April (originally 115,000) and 143,000 in March (prior estimate up 154,000). The net revisions for March and April were down 49,000. Analysts expected a 150,000 boost for May.

    Private payrolls gained 82,000 in April after an 87,000 advance the prior month. The consensus forecast was for a 164,000 increase.

    Goods-producing industry employment fell 15,000 after a 4,000 rise in April. For the latest month, manufacturing increased 12,000; construction fell 28,000; and mining edged up 1,000.

    Private service-providing industry employment rose 97,000, following an 83,000 increase in April.

    The public sector continued to shrink with a 13,000 drop in government employment.

    Average hourly earnings edged up 0.1 percent, matching the pace in April. Expectations were for a 0.2 percent gain. The average workweek slipped to 34.4 hours from 34.5 in April. Analysts called for 34.5 hours for May.

    Today's employment report is extremely disappointing. Businesses have brought hiring to a near halt even as demand is moderately healthy according to PCE spending and auto sales.

    On the news, equity futures declined notably.

  • Market Consensus before announcement
    Nonfarm payroll employment in April increased only 115,000, following increases of 154,000 in March and 259,000 in February. Private payrolls rose 130,000 in April after a 166,000 increase the prior month. From the household survey, the unemployment rate dipped to 8.1 percent from 8.2 percent in March. Back to the payroll survey, goods-producing industry employment rose 14,000 after a 38,000 boost in March. Private service-providing industry employment rose 116,000, following a 128,000 gain in March. The public sector continued to downsize with a 15,000 drop in government employment. Average hourly earnings were flat, following a 0.2 percent gain in March. The average workweek for all workers in April was steady at 34.5 hours.

United States : PMI Manufacturing Index

  • May was a healthy month for US manufacturing based on Markit's PMI which came in at 54.0, safely above 50 to indicate growth compared to April but 2 points below April to indicate a slower rate of growth. Output is steady while new orders are coming in at a moderate and sustainable rate though export orders, reflecting weakness in Europe and China, are flat. Total backlogs continue to build while inventories are healthy and steady. Price pressures for both inputs and outputs show significant moderation in the month. Markit's PMI, which is the new kid on the calendar, has been holding tightly around the 55 level so far this year, slightly above the ISM's PMI, the May version of which will be posted later this morning at 10:00 a.m. ET.